rockhopper exploration plc building a well-funded, full ... · [email protected]...

Rockhopper E

xploration plc R

eport and Accounts for the year ended 31 D

ecember 2018

Telephone +44 (0)207 486 1677info@rockhopperexploration.co.ukwww.rockhopperexploration.co.ukTwitter @RockhopperExplo

Company Reg. No. 05250250

Rockhopper Exploration plc

Head office:4th Floor5 Welbeck StreetLondon W1G 9YQ

Building a well-funded, full-cycle, exploration-led

E&P company

Report and Accounts for the year ended 31 December 2018

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Strategic Report 1 Highlights 3 Rockhopper – the story so far 4 Rockhopper at a glance 6 Vision, strategy and business model 7 Chairman and Chief Executive Officer’s review 9 Industry overview 10 Sea Lion Phase 1 development overview 12 Operations review17 Key Performance Indicators (KPIs)18 Financial review21 Internal controls and risk management22 Principal risks and uncertainties 26 Health, safety, environmental and social management

Governance Report27 Rockhopper Board28 Board of Directors30 Senior management team 31 Corporate governance statement35 Audit & Risk Committee Chairman’s report 38 Nomination Committee Chairman’s report39 Remuneration report50 Statutory information52 Independent auditor’s report to the

members of Rockhopper Exploration plc

Financial StatementsGroup company financial statements55 Group income statement55 Group statement of comprehensive income56 Group balance sheet57 Group statement of changes in equity58 Group cash flow statement59 Notes to the group financial statements

Parent company financial statements79 Company balance sheet80 Company statement of changes in equity81 Notes to the company financial statements

87 Key licence interests as at 1 April 2019

Supplementary Information88 Glossary89 Shareholder information

Cover: Stanley Harbour

Rockhopper Exploration plc (AIM: RKH) is an oil and gas exploration and production company with key interests in the North Falkland Basin and the Greater Mediterranean region.

Key contacts

Registered address and head office:4th Floor5 Welbeck StreetLondon W1G 9YQ

NOMAD and joint brokerCanaccord Genuity Limited88 Wood Street London EC2V 7QR

Joint brokerPeel Hunt LLPMoor House120 London Wall London EC2Y 5ET

SolicitorsAshurst LLPBroadwalk House5 Appold StreetLondon EC2A 2DA

Principal BankersRoyal Bank of Scotland plc36 St Andrew SquareEdinburgh EH2 2YB

AuditorKPMG LLP15 Canada SquareLondon E14 5GL

RegistrarComputershare Investor Services plcVintners Place68 Upper Thames StreetLondon EC4V 3BJ

Concerns and procedures

General [email protected]

Audit committee [email protected]

Websitewww.rockhopperexploration.co.uk

Shareholder concerns:Should shareholders have concerns which have not been adequately addressed by the chairman or chief executive, please contact the chairman of the audit committee at:[email protected]

Whistle-blowing procedures:Should employees, consultants, contractors or other interested parties have concerns which have not been adequately addressed by the chairman or chief executive, please contact the chairman of the audit committee at:[email protected]

Shareholder information

Supplementary InformationRockhopper Exploration plc

Report & Accounts for the year ended 31 December 2018 89

Rockhopper Exploration plc Strategic Report

1Report & Accounts for the year ended 31 December 2018

Highlights

Sea Lion Phase 1 development – securing senior debt funding represents last major milestone to achievement of FID

> Front End Engineering and Design completed in Q1 2019> Process to progress contractor LOIs to full agreements

well advanced> Field Development Plan and Environmental Impact Statement

substantially agreed with the Falkland Islands Government – final approval expected at sanction

> Good progress made with the Falkland Islands Government on Sea Lion royalty and fiscal terms

> Financing structure progressed – extensive due diligence and assurance process underway

> Vendor financing – contractors have agreed to provide up to US$400 million of funding for the project

> Project momentum building with budget approved in Q3 2018 to increase activity and expand the Operator’s project development team

Greater Mediterranean portfolio continues to deliver stable production with exploration upside

> Net working interest production averaged 1.1 kboepd in 2018 > Multiple oil and gas discoveries as a result of the 2018 drilling

campaign at Abu Sennan, Egypt

– Successful infill drilling and implementation of a water injection programme at the Al Jahraa field to enhance production and maximise recoverability

– Oil discovery in the Bahariya de-risks future exploration at this level across the concession

2 Report & Accounts for the year ended 31 December 2018

Rockhopper Exploration plcStrategic Report

Strong financial performance with continued focus on managing costs> Revenue of US$10.6 million; operating costs US$4.6 million;

cash flow from operations US$5.4 million> Cash operating costs of US$11.7 per boe –

maintaining a low cost base> Continued management of G&A costs –

US$5.3 million – down over 50% since 2014> G&A costs covered by operating cash flows> Cash resources of US$40.4 million at 31 December 2018

and no debt

Corporate> International arbitration hearing in relation to Ombrina Mare

took place in February 2019 > Alison Baker appointed as Independent Non-Executive Director

in September 2018

Outlook> Joint venture to submit formal senior debt funding application on

Sea Lion Phase 1 in Q2 2019> Outcome in relation to Ombrina Mare arbitration expected in

late Q3 or early Q4 2019 – seeking significant monetary damages> Active drilling campaign at Abu Sennan, Egypt with four wells

planned during 2019> Appointment of Keith Lough as Non-Executive Chairman

following the retirement of David McManus at Company’s forthcoming AGM

> Continued pursuit of new venture opportunities to supplement production, enhance cash flow and strengthen balance sheet



NFB exploration campaign commences In March, the Eirik Raude rig arrives in the North Falkland Basin to commence a multi-well drilling campaign. Exploration successes at Zebedee and Isobel Deep with multiple oil discoveries made.

In November, Rockhopper announced the terms of its all-share merger with Falkland Oil & Gas. Through the merger with FOGL, Rockhopper consolidates its leading acreage and resource position in the North Falkland Basin.

Sea Lion discovery and appraisalIn February 2010, the Ocean Guardian drilling rig arrived in Falklands waters to carry out a multi-well programme on behalf of multiple operators. In the spring, Rockhopper (as operator) drilled its first exploration well on the Sea Lion prospect which resulted in an oil discovery. The well was successfully flow tested in September.

During late 2010/11 a further eight exploration and appraisal wells were drilled by Rockhopper across the complex, six of those being discoveries.

In addition, Rockhopper participated in a further five non-operated wells.

Farm-OutIn July, Rockhopper announced it had entered into a farm-out agreement with Premier Oil plc (“Premier”), whereby Premier acquired a 60% operated interest in Rockhopper’s North Falkland Basin licences for undiscounted consideration of c.$1bn (comprising cash, development carry and exploration carry).

In recognition of Rockhopper’s unrivalled understanding of the North Falkland Basin, it was agreed that Rockhopper would retain the sub-surface lead in relation to future exploration activities.

Acquisition of MOG In May, Rockhopper announced a recommended cash and share offer to acquire AIM listed Mediterranean Oil & Gas plc. The transaction completed in August. Through the acquisition Rockhopper acquired a portfolio of production, development, appraisal and exploration interests in Italy, Malta and France.

Rockhopper – the story so far

Completion of FEEDFEED completion Q1 2019.

Letters of Intent signed with a number of key contractors for the provision of services and vendor financing for the Sea Lion project.

Field Development Plan and Environmental Impact Statement for Sea Lion substantially agreed with the Falkland Island Government – final approval expected at sanction.

Ombrina Mare arbitration commencesRockhopper commences international arbitration proceedings, seeking very significant monetary damages, as a result of the Republic of Italy’s breaches of the Energy Charter Treaty in relation to the Ombrina Mare project.

Sea Lion enters FEEDSea Lion project enters FEED with set of world-class contractors.

Rockhopper completes merger with Falkland Oil & Gas Ltd following shareholder approval from both Rockhopper and FOGL shareholders.

Rockhopper acquires non-operated production and exploration assets in Egypt.

Consolidates interests in NFB acreage Rockhopper consolidates its interests in the Falklands through the farm-in to acreage held by Desire Petroleum. As a result, Rockhopper increases its interests in licences PL004a, PL004b and PL004c to 24%.

2018/Q1 2019

2016

2014

2012

2017

2015

2013

2010/11



Rockhopper at a glance

* Operator estimate

† Sea Lion Phase 2 straddles licences PL032 in which Rockhopper holds a 40% interest and PL004 in which Rockhopper holds a 64% interest.

North Falkland BasinSea Lion Phase 1 (PL032)> 40% working interest> 220 mmbbls gross*

88 mmbbls net to Rockhopper*

Sea Lion Phase 2 (PL032/PL004)> 40-64% working interest†

> 300 mmbbls gross* 120-192 mmbbls net to Rockhopper*

Phase 3 – Isobel-Elaine (PL004)> 64% working interest> Isobel-Elaine complex significantly

de-risked during 2015/16 exploration campaign

Head OfficeLondon, UK

Regional OfficesRome, Italy Cairo, Egypt

Falkland Islands

Rockhopper (op) 100.0%



Rockhopper 40.0%

Rockhopper64.0%

0 10

kms

Sea Lion

Zebedee

Isobel/Elaine

Chatham

Jayne

60°W

50°S50°S50°S

FALKLANDISLANDS

F A L K L A N DI S L A N D S

STANLEYSTANLEY

100 kms



ITALY

0 300

Kilometers

L IBYA

EGYP T

T URK E YGREECE

Exploration

Production

Discovery

Guendalina

Ombrina MareCivita

Monte Grosso

GuendalinaAbu Sennan

T URK E Y

0 100 200

Kilometers

M e d i t e r r a n e a n S e a

RedSea

ABUSENNAN

EL QA’APLAIN

C a i r o S u e z

E G Y P T

El Qa’a Plain

GPT

GPT SW

Abu El GharadigWestern Desert 33

Abu El Gharadig NE

BW1

Abo Senan

Sheiba 181Badr El Din 11Badr El Din 01

Badr El Din 04

WesternDesert 33/15

GPT SW

Abu El GharadigWestern Desert 33

Abu El Gharadig NE

BW1

Abo Senan

Sheiba 181Badr El Din 11Badr El Din 01

Badr El Din 04

WesternDesert 33/15

Abu Sennan

Al Jahraa-1 GPZZ-1

GPZZ

ASA-1X

Al Ahmadi-1X

ASH-1X

El Salmiya-1

Al Jahraa SE-1X

Oil wellAbu Sennan LicenceProduction leaseSeismic areaOil fieldGas field

0 5 10

Kilometers

GPY

Abu El Gharadig

Al Jahraa-1Al Jahraa-1Al Jahraa-1

Al JahraaAl Jahraa-1Al Jahraa-1Al Jahraa-1Al Jahraa-1Al Jahraa-1Al Jahraa-1Al Jahraa-1Al Jahraa-1Al Jahraa-1

Al Ahamadi

Ash

Western

El Salmiya-1El Salmiya-1El Salmiya-1El Salmiya-1El Salmiya-1El Salmiya-1El Salmiya-1El Salmiya-1El Salmiya-1El Salmiya-1

El Salmiya

GPT

Abo Senan

Al Jahraa SE-1XAl Jahraa SE-1XAl Jahraa SE-1X

Al Jahraa SE

ASA-1XASA-1XASA-1XASA-1XASA-1X

Asa

T UNI SI A

ItalyGuendalina> 20% working interest> Northern Adriatic gas

production

Civita> 100% working interest> Onshore gas production

Monte Grosso> 23% working interest> Exploration stage – seeking

regulatory permits to drill

Ombrina Mare> 100% working interest> International arbitration

commenced – outcome expected late Q3/early Q4 2019

EgyptAbu Sennan> 22% working interest> Western Desert oil and

gas production

El Qa’a Plain > 25% working interest> Exploration commitment

well drilled 2018

Greater Mediterranean



To build a well-funded, full-cycle, exploration-led E&P company

> Building a balanced portfolio in core areas> Focus on North Falkland Basin

and Greater Mediterranean > Across the full asset life cycle> Production base to enable growth

through exploration> Maintaining balance sheet strength

> Prudent balance sheet management> Partial monetisation of assets to fund

development> Disciplined approach to cost management

> Value accretive exploration> Leveraging technical skillset> Focus on proven hydrocarbon basins> Managed exposure to high-impact opportunities

> Proven basins> High impact> Managed exposure

> Right-sized to fund exploration

> Self-funded through operating cash flows or partial monetisation

Exploration >

< Production < Developm

ent

Creatingvalue

Production(kboepd)

0.32014

0.32015

0.82016

1.22017

1.12018

Gross Sea Lion Complex resources(mmbbl)

386March2012

2C5603C

5172C9003C

April2016

Revenue(US$m)

1.92014

4.02015

7.42016

10.42017

10.62018

Recurring G&A costs(US$m)

10.82014

9.42015

2016

5.32017

5.32018

7.4

Vision

Strategy

Business model

Delivering on strategy

Vision, strategy and business model



Chairman and Chief Executive Officer’s review

Rockhopper’s strategy is to build a well-funded, full-cycle, exploration led E&P company.

Against a backdrop of volatile commodity prices, Rockhopper has continued to balance the progression of its world-class Sea Lion project in the North Falkland Basin with an ongoing focus on cost control.

Sea Lion has the potential to be transformational for Rockhopper and the Falkland Islands as a whole. Securing funding is the last remaining major milestone before Sea Lion can reach FID and all efforts are focused on securing such financing to allow the project to move into the development phase.

In the Greater Mediterranean, our portfolio continues to meet its primary objective, namely to provide a production and cash flow base to fund our corporate and operating costs and support our balance sheet.

We maintain ambitions to further expand our production base thereby generating additional free cash flow to strengthen our balance sheet and invest in future exploration or other value-accretive growth opportunities both in the Falklands and elsewhere.

Sea Lion Phase 1 – FEED completed; formal funding application to be submitted Q2 2019Material progress continues to be made across a range of commercial, fiscal and funding matters as we work towards a final investment decision on the Phase 1 development of the Sea Lion field.

During 2018, FEED contracts were awarded for all the outstanding elements of the project scope with a corresponding increase in activity, expenditure and expansion of the Operator’s project development team. Although FEED concluded in March 2019, increased activity levels are expected to be maintained throughout 2019 in the lead up to project sanction. The process to agree fully termed documentation for the provision of contractor services and vendor finance is well advanced and letters of award will be issued as we go through the sanction gate.

Engagement continues with the Falkland Islands Government (“FIG”) on a range of environmental, fiscal and regulatory matters with a view to obtaining the consents and agreements necessary to be in a position to reach a final investment decision. Following submission of a revised Field Development Plan (“FDP”) to FIG in March 2018, the FDP is considered substantially agreed. The Environmental Impact Statement (“EIS”) public consultation process concluded in March 2018 with no material objections

received. The final EIS document has been submitted to FIG. Formal approval of the EIS and FDP are expected at sanction.

Good progress has been made with FIG on the royalty and fiscal terms which will apply to the first phase of development of the Sea Lion field. A public consultation on a number of technical tax matters associated with oil field development in the Falklands was concluded in the third quarter of 2018 with a number of technical amendments and clarifications being implemented. These amendments and clarifications provided definition on a number of important regulatory and tax matters which were critical to enabling the project to progress.

The Sea Lion financing plan comprises funding elements including senior project finance debt (likely involving a combination of export credit financing and project bank funding), vendor financing from contractors and equity from the joint venture. Rockhopper’s share of the joint venture equity is to be funded through the carry arrangements with Premier. The joint venture continues to lead engagement with a wide range of stakeholders to obtain the support required to secure senior project finance debt, which represents the core of the project’s funding strategy. With initial debt feasibility and structuring now progressed, the joint venture expects to submit the Project Information Memorandum (“PIM”) and formal funding application during Q2 2019. On the vendor financing side, the project contractors have undertaken an extensive due diligence and assurance process and, subject to the finalisation of documentation, have agreed to provide up to US$400 million of funding for the project.

Greater Mediterranean portfolio continues to deliver stable production with exploration upsideOur Greater Mediterranean portfolio continued to perform well with production growth in Egypt broadly offsetting declining production in Italy. Production during 2018 averaged 1.1 kboepd net to Rockhopper, with operating cash flows again covering the Group’s G&A costs.

In June 2018, the Company announced the commencement of a four-well drilling campaign across its Egyptian portfolio, including three wells at Abu Sennan and one at El Qa’a Plain. Whilst the Raya commitment well on the El Qa’a Plain concession encountered good quality sands, no hydrocarbons were encountered.

Within the Abu Sennan concession, successful infill oil producers were drilled at Al Jahraa-6 and Al Jahraa-10 as well as a successful exploration well at

David McManusChairman

Samuel MoodyChief Executive Officer

ASZ-1X. At Al Jahraa-6, success occurred in both the primary objective, being the Abu Roash-C reservoir, and with a new oil discovery in the deeper Bahariya section. The Bahariya formation was subsequently put into production and continues to make a meaningful contribution to overall volumes from the concession.

During 2018 the Company continued to see a material improvement in the payment situation in Egypt with a significant decline in outstanding receivables owed by Egyptian General Petroleum Corporation (“EGPC”).

Corporate mattersRockhopper commenced international arbitration proceedings against the Republic of Italy in relation to the Ombrina Mare field in March 2017. The hearing took place in early February 2019 in Paris. Rockhopper continues to believe it has strong prospects of recovering very significant monetary damages – on the basis of lost profits - as a result of the Republic of Italy’s breaches of the Energy Charter Treaty. All costs associated with the arbitration are funded on a non-recourse (“no win - no fee”) basis from a specialist arbitration funder.

As part of the Board’s long-term succession planning, and having served on the Board for nearly nine years, the past three as Non-Executive Chairman, David McManus will be retiring as a Director with effect from the Company’s 2019 Annual General Meeting (“AGM”). David will be succeeded as Non-Executive Chairman by Keith Lough, currently the Senior Independent Director and a Non-Executive Director of the Company since January 2014.

In September 2018, Alison Baker was appointed as an Independent Non-Executive Director. Alison has nearly 25 years’ experience in the provision of audit, capital markets and advisory services, having led the UK and EMEA Oil and Gas practice at PricewaterhouseCoopers and prior to that the Energy, Utilities and Mining Assurance practice at Ernst & Young. Alison is currently an Independent Non-Executive Director of KAZ Minerals PLC and Centamin plc. Alison will replace Keith as Chairman of the Audit and Risk Committee, also with effect from the 2019 AGM.

Accordingly, following the Company’s 2019 AGM, the Board will comprise six Directors – two Executive Directors and four Non-Executive Directors, including the Chairman. However, as part of the Board’s long-term succession planning and given our continued focus on corporate costs, the aim remains to further reduce the size of the Board over time. In this regard, and as previously announced,

it is anticipated that Tim Bushell will step down from the Board at or before the Company’s AGM in 2020.

From 28 September 2018, all AIM companies are required to state which recognised corporate governance code the Board has decided to apply and to explain how the Company complies with that code. Following a review of the alternative codes available, the Board decided to adopt the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”) and suitable disclosures will be made going forward.

Following the conclusion of a formal tender process, the Board has approved the proposed appointment of PricewaterhouseCoopers as the Company’s auditor for the financial year commencing 1 January 2019. This appointment is subject to approval by shareholders of the Company at the 2019 AGM.

OutlookSea Lion has the potential to be transformational for Rockhopper and all efforts remain focused on securing the requisite stakeholder support and funding to allow sanction to occur.

With Brent oil prices currently above US$65 per barrel, the economics for the Sea Lion project remain robust. It is in this context that the Board remains confident that the requisite stakeholder support and funding will be secured. Whilst PIM and formal funding application submission represent a significant milestone in the financing process, the timetable and process to secure such funding remains outside our control.

The outcome of the international arbitration against the Republic of Italy is expected later this year and following the hearing in February we remain confident that we have strong prospects of recovering very significant monetary damages.

Our Greater Mediterranean portfolio continues to provide the necessary operating cash flow to fund corporate costs while providing low-risk exploration upside opportunities. On a highly selective basis, the Company will seek to further expand the production base with the aim of generating additional free cash flow to invest in future exploration and value-accretive growth opportunities both in the Falklands and elsewhere.

David McManus Non-Executive Chairman

Samuel MoodyChief Executive Officer

1 April 20198 Report & Accounts for the year ended 31 December 2018


>Senior management team – biographies on page 30



Industry overview

Economic and political> Continued global political and economic uncertainty> Iranian sanctions and US-China trade outlook provided

volatile backdrop> Ongoing Eurozone uncertainty associated with Brexit> Global growth outlook considered robust overall although

increasing risk of US recession from 2020 onwards.

Commodity prices> Volatility continued through 2018> Brent price increased during the first three-quarters

of 2018, peaking at $84/bbl in October> Sharp fall in Q4 with Brent ending the year at $50/bbl> Key supply/demand dynamics in the year impacted by

supply disruptions in Nigeria and Venezuela, continued strong output and increasing efficiencies from US shale, and OPEC response to changing market dynamics

> Outlook for 2019 remains volatile given limited spare production capacity, uncertain growth outlook and scope for further political interventions.

Climate change and the impact on the energy outlook> Whilst global energy consumption is expected to grow

strongly out to 2040 and beyond, increasing pressure to reduce greenhouse gas emissions will impact the future energy mix

> With oil demand in absolute terms expected to remain robust, it will nonetheless likely make a smaller percentage contribution to the future energy mix with renewables making an increasing contribution from a relatively low level today.

Industry investment, activity levels and costs> Through 2018, the industry continued to take a conservative

approach to capital investment with a focus on smaller, brownfield or expansion projects

> Industry costs remain low compared with those three to five years ago, reflecting the sectors continued focus on cost reductions, project deferrals, capturing efficiencies, industry standardisation and co-operation around shared infrastructure

> With an improved oil price outlook, and an attractive cost environment, investments in new greenfield projects, such as Sea Lion, are expected to increase.

Sour

ce: I

HS

Mar

kit 2

018

0

40

80

120

2013

109

2014

100

2015

54

2016

45

2017

54

2018

71

Primary energy demandBillion ton

* Industry excludes non-combusted use of fuels

Sour

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018

BP

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20 TransportIndustry*Non-combustedBuildings

1970 1980 1990 2000 2010 2020 2030 20400

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20 OtherAfricaOther AsiaIndiaChinaOECD

1970 1980 1990 2000 2010 2020 2030 2040

End use sector Region Fuel

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1970 1980 1990 2000 2010 2020 2030 2040

RenewablesHydroNuclearCoalGasOil

Average Brent Crude priceUS$/bbl

0

100

150

50

200

250

2000 2002 2004 2006 2010 2012 2014 2016 2018 2020

Upstream Capital Costs Index (UCCI) / Upstream Operating Costs Index (UOCI)Cost Index (Year 2000=100)

UCCIQ4 2018182

UOCIQ4 2018172



Sea Lion Phase 1 development overview

Gross CAPEX to first oil

US$1.5 bnResource to be monitised

220 mmbbls(Phase 1 only)

Gross annual production (at plateau)

80,000 bopdFPSO liquid capacity

120,000 bpd

Key facts

Proven development conceptWorld scale resource

> 1.7 billion barrels oil in place

> Well understood reservoir

> Highly marketable crude

Proven development concept

> Technically straightforward FPSO development

> Extensive project development and engineering complete

> Supply chain and logistics proven through multiple drilling campaigns

Regulatory interface well-advanced

> EIS and FDP substantially agreed; final approval at sanction

> Alignment with FIG on key fiscal, commercial and regulatory items

World class contractor team

> Experienced in comparable projects

> Opportunity to lock in supply chain at competitive rates

> Alignment via provision of vendor financing



Gross project revenue per annum

US$1.8 bn(at plateau, assuming US$65/bbl)

Estimated opex per barrel

US$25/bbl(Life of field, including field opex and FPSO lease)

Wells to be drilled

23of which 16 oil producers

Owner’scosts

WellsSubseaPre-firstoil capex$1.5bn

25%Upstream

partnership

50%Export credit/bank finance

25%Vendor

financing

Indicative financing plan



Sea Lion, North Falkland BasinRockhopper is the leading acreage holder in the North Falkland Basin with a material working interest in all key licences.

The overall strategy to develop the North Falkland Basin remains a phased development solution, starting with Sea Lion Phase 1, which will develop approximately 220 mmbbls in PL032 (in which Rockhopper has a 40% working interest). A subsequent Phase 2 development will develop a further 300 mmbbls from the remaining resources in PL032 and the satellite accumulations in the north of PL004 (in which Rockhopper has a 64% working interest). In addition, there is a further 200 mmbbls of low risk, near field exploration potential which could be included in either the Phase 1 or Phase 2 developments. Phase 3 will entail the development of the Isobel/Elaine fan complex in the south of PL004, subject to further appraisal drilling.

The resources in Sea Lion Phase 1 will be commercialised utilising a conventional FPSO development scheme with approximately 23 subsea wells. Estimated gross capex to first oil remains US$1.5 billion. The Sea Lion financing plan comprises funding elements including senior project finance debt, vendor financing from contractors and equity from the joint venture. Rockhopper’s share of the joint venture equity is to be funded through the carry arrangements with Premier.

Through 2017 and 2018, work focused on securing agreements with key supply chain contractors and, as a result, LOIs have been signed for the provision of key services, including the FPSO, the drilling rig, well services, subsea production systems and helicopter services, as well as vendor funding. The process to convert the LOIs into fully termed executed contracts

is well advanced and letters of award will be issued as we go through the sanction process.

Through 2018, discussions continued with FIG on a range of fiscal, environmental and regulatory matters. Following the submission of a revised draft FDP to FIG in early March 2018, the FDP is now considered substantially agreed with a final FDP submission expected in the lead-up to sanction. With the FDP and EIS largely complete, a 42-day public consultation on the EIS commenced in January 2018. No material objections were raised through the consultation process and various comments identified through the process have been addressed in the final EIS submission. Engagement with FIG continues with a view to obtaining the consents and agreements necessary to be in a position to reach a final investment decision.

The Sea Lion Discovery Area is due to expire on 15 April 2020. The submission of the final Field Development Plan for FIG approval is expected before that date and therefore no further license extension is currently thought to be required from FIG.

South and East Falkland Basin (100% working interest)Through the acquisition of Falkland Oil and Gas (“FOGL”) in 2016, Rockhopper acquired a 52% interest in Noble Energy operated acreage to the South and East of the Falkland Islands. Following the results of the Humpback well, Noble and Edison gave notice to withdraw from this acreage and, as a result, during 2017 Rockhopper became operator of the South and East Falkland Basin acreage with a 100% working interest. No outstanding financial or operational commitments exist in relation to the Company’s South and East Falkland Basins’ interests.

Operations review

Stanley Heliport



Leading acreage position Rockhopper Premier Other Operator

PL032 40% 60% — Premier

PL003a 95.5% 4.5% — Rockhopper

PL003b 60.5% 4.5% 35% Rockhopper

PL004a 64% 36% — Premier

PL004b 64% 36% — Premier

PL004c 64% 36% — Premier

PL005 100% — — Rockhopper

Source: xxxx

0 5 10 15 20

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40

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140Phase 2Phase 1

Aver

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annu

al d

aily

oil

rate

(kbo

pd)

Years from first production

Projected production profile

North Falkland Basin snapshot

Sea Lion development schematic



Abu Sennan, Egypt (22% working interest)Production from the six development leases within the Abu Sennan concession increased during 2018 with production during the period averaging approximately 813 boepd net to Rockhopper (2017: 760 boepd).

In July 2018, Rockhopper was pleased to announce the commencement of the 2018 drilling campaign on the Abu Sennan concession which included the drilling of two development wells (“Al Jahraa-6” and “Al Jahraa-10”), one exploration well (“ASZ-1X”), and a water injection programme targeting the Al Jahraa field.

Al Jahraa-6The Al Jahraa-6 development well spudded on 4 July 2018 and reached total depth of 3,935m MD (-3,623m tvdss) in the Kharita Formation on 19 August 2018. Mudlogs indicated the presence of oil in the Abu Roash C, D, E and G levels and the deeper exploration target in the Bahariya Formation. The Bahariya formation was put on test on 22 September 2018 and, after clean-up, is producing in excess of 550 barrels of oil per day (“bopd”) with a stable water cut of 22%. This represents the first commercial oil production from the Bahariya formation within the Abu Sennan concession. The well has been completed to allow potential future production from Abu Roash G and C levels. The Company believes that the Bahariya discovery de-risks additional exploration targets at the same level elsewhere in the concession.

Al Jahraa-10The Al Jahraa-10 development well reached total depth on 16 October 2018 in the Abu Roash-F Formation. Oil pay was calculated in the Abu Roash-C and Abu Roash-D levels. Following testing operations, the well was brought into production

from Abu Roash-C at a rate of 130 bopd gross, and subject to further increase. Upside potential exists in Abu Roash-D which is being evaluated for possible acid stimulation.

ASZ-1XExploration well ASZ-1X located on Prospect S was spudded on 8 November 2018 and was the first of two commitment wells to be drilled in the first phase of the new concession. An oil discovery was made in the Abu Roash-C level. The award of a development lease over the discovery has recently been approved by EGPC and production has commenced.

Water injectionThe water injection programme in Al Jahraa began on 14 July 2018. Injection rates have increased steadily over time, with an accompanying reduction in wellhead pressure, indicating that reservoir injectivity has become established. Injection rates into the Al Jahraa-9 well are currently averaging approximately 2,000 barrels of water per day, which is sufficient to re-pressurise the reservoir.

2019 drilling campaignFollowing joint venture approval, an active drilling programme has been agreed for 2019 including the drilling of one exploration well (SW-ASH-1X), two in-fill oil producer wells (Al Jahraa-11 and Al Jahraa-7) and a second water injection well on the Al Jahraa field. Activity in 2019 continues the planned development programme in the Al Jahraa field, as well as further exploration on the concession.

The Al Jahraa-11 development well, the first in the 2019 programme, was spudded on 13 March 2019 and is targeting the AR-C and Bahariya reservoirs. The well is expected to take approximately two months to complete.



Civita

Adriatic Sea

Campobasso

ITALY

0 50

Kilometres

Civita> 100% working

interest> Onshore gas

production> 2018 production

130 boepd (excluding pipeline disruption)

Guendalina

Adriatic Sea

Rimini

ITALY

CROATIA

0 50

Kilometres

Guendalina> 20% working

interest> Northern

Adriatic> 2018 production

180 boepd

Cairo

Abu Sennan

Mediterranean Sea

EGYPT0 200

Kilometres

Monte Grosso

Adriatic Sea

Taranto

Tyrrhenian Sea

ITALY

0 100

Kilometres

Bari

Abu Sennan> 22% working

interest> Western Desert> 2018 production

813 boepd

Monte Grosso > 23% working

interest> ~250 mmbbl

oil prospect> 23% chance

of successOmbrina Mare

Adriatic Sea

Pescara

ITALY

0 50

Kilometres

CairoEl Qa’aPlain

Mediterranean Sea

RedSea

EGYPT

0 200

Kilometres

Ombrina Mare> 100% working

interest> International

arbitration commenced

> Outcome expected late Q3/early Q4 2019

El Qa’a Plain> 25% working

interest> Exploration

commitment well drilled Q2 2018

> Relinquished end of 2018

Greater Mediterranean snapshot

Egypt

Italy

Egypt



Monte Grosso, Italy (23% working interest)Rockhopper transferred the operatorship of the Serra San Bernado permit (which contains the Monte Grosso prospect) to Eni during 2016. Since that time, options for the design of a well on the Monte Grosso prospect have been explored and work undertaken to secure the permits and approvals required to drill a well.

However, on 12 February 2019, the Italian government introduced certain further changes to oil and gas law through the “Sustainable Energy Bill”. These changes include, amongst other things, a temporary suspension on exploration activities including the drilling of exploration wells. Discussions are ongoing between the Serra San Bernado joint venture partners to agree a forward plan.

El Qa’a Plain, Egypt (25% working interest)Exploration commitment well Raya-1X in the El Qa’a Plain concession was spudded on 17 June 2018 and reached TD approximately two weeks later. At the primary Nukhul Formation objective, wireline logging confirmed the presence of good porosity sands, although no hydrocarbons were encountered. The well has been plugged and abandoned and concession relinquished.

Guendalina, Italy (20% working interest)Production decline at Guendalina continued to be broadly in line with expectations during 2018 with production over the period averaging approximately 30,000 standard cubic metres (“scm”) per day of gas net to Rockhopper (approximately 180 boe per day). Plant availability over the period continued to be strong with production from the side-track well in 2015 continuing to make a material contribution to field production. Efforts continue with the operator to manage declining production levels as well as reduce operating costs.

Civita, Italy (100% working interest)In February 2018, a depressurisation event occurred at the Civita pipeline and, as a result, production was suspended. Following remedial works and reinstatement of the pipeline, production recommenced in July 2018 at pre-incident levels of approximately 20,000 scm per day of gas (approximately 130 boe per day).

As described later in the Financial Review, the Company agreed in June 2017 the terms for the disposal of a package of non-core interests in Italy, including the Civita field, to Cabot Energy plc. However, following failure to satisfy all relevant conditions precedent, including receipt of requisite regulatory approvals in Italy, the Company and Cabot have mutually agreed not to proceed with the transaction.

Bringing an additional paying partner into the Sea Lion Development project and/or working closely with the operator to deliver a financing solution to enable the joint venture to advance to project sanction.

KPI #1



Key Performance Indicators (KPIs)

The Board monitors the Company’s progress against its Key Performance Indicators to assess performance and delivery against pre-defined strategic objectives.

KPIs have been set based on short-term targets designed to ensure the Company achieves its long-term strategy.

The Company measures a number of operational and financial metrics to ascertain performance.

In 2018, Rockhopper continued to deliver on a number of its key metrics.

2018

Preservation of the Company’s cash position/strengthen the Company’s balance sheet.

Bringing an additional paying partner into the Sea Lion Development project and/or working closely with the operator to deliver a financing solution to enable the joint venture to advance to project sanction.

Making a commercial discovery in Egypt.

> Letters of Intent signed with contractors for provision of vendor finance

> Discussions ongoing with senior debt providers

> Preparation well advanced for PIM submission Q2 2019

> Al Jahraa-6: Successful oil discovery in Bahariya

> ASZ-1X: Successful oil discovery in AR-C. Development lease recently approved

Performance Attainment

Partially achieved

Partially achieved

Fully achieved

Preservation of the Company’s cash position/strengthen the Company’s balance sheet which could be by way of a new venture.

> Cash at 31 December 2018 $40 million and no debt

> G&A maintained at 2017 levels

> Significant number of new venture opportunities reviewed in 2018. However, none met the Company’s investment criteria

KPI #1

KPI #2

KPI #2

KPI #3

2019

Definition

Definition



OverviewDuring 2018, significant progress was made to advance and execute the financing plan for the Sea Lion Phase 1 development. Submission of the PIM and formal funding application for senior project finance debt, expected in Q2 2019, represents a material milestone in the funding process.

Our Greater Mediterranean portfolio continues to provide a low-cost, short-cycle production base which has delivered strong revenues and operating cash flows for the Company which have more than covered the Group’s G&A costs.

Results summary

US$m (unless otherwise specified) 2018 2017

Production (kboepd) 1.1 1.2Revenue 10.6 10.4Cash operating costs 4.6 4.1

Recurring administrative expenses (“G&A”) 5.3 5.3 Loss after tax (7.1) (6.1) Cash in flow from operating activities 5.4 1.6

Cash resources 40.4 50.7Net assets 415.3 420.6

Results for the yearFor the year ended 31 December 2018, the Group reported revenues of US$10.6 million and cash from operating activities of US$5.4 million.

RevenueThe Group’s revenues of US$10.6 million (2017: $10.4 million) during the year relate entirely to the sale of oil and natural gas in the Greater Mediterranean (Egypt and Italy). The increase in revenues from the comparable period reflects an increase in realised oil and gas prices, offset by a modest reduction in production (due to natural field decline at Guendalina and pipeline issues at Civita). Working interest production averaged approximately 1,064 boepd during 2018, a small reduction over the comparable period (2017: 1,184 boepd).

During the year, the Group’s gas production in Italy was sold under short-term contract with an average realised price of w0.25 per scm (2017: w0.19 per scm), equivalent to US$8.2 per thousand standard cubic feet (“mscf”). Gas is sold at a price linked to the Italian “PSV” (Virtual Exchange Point) gas marker price. In Egypt, all of the Group’s oil and gas production is sold to EGPC. The average realised price for oil was US$68.4 per barrel, a small discount to the average Brent price over the same period. Gas is sold at a fixed price of US$2.65 per million British thermal units (“mmbtu”).

Operating costsCash operating costs, excluding depreciation and impairment charges, amounted to US$4.6 million (2017: US$4.1 million). The small increase in underlying cash operating costs is primarily due to the costs associated with the development wells and water injection programme being carried out at Abu Sennan as well as incremental operating costs at Guendalina. Cash operating costs on a per barrel of oil equivalent basis remain attractive at US$11.7 per boe. The Group continues to manage corporate costs having achieved an approximate 50% reduction in G&A cost, excluding non-recurring expenses related to restructuring and acquisitions, since 2014. G&A costs in 2018 amounted to US$5.3 million, flat with the comparable year (2017: US$5.3 million).

Following the decision in February 2016 by the Ministry of Economic Development not to award the Group a Production Concession covering the Ombrina Mare field, in March 2017, the Group commenced international arbitration proceedings against the Republic of Italy. All costs associated with the arbitration are funded on a non-recourse (“no win – no fee”) basis from a specialist arbitration funder.

Cash movements and capital expenditureAt 31 December 2018, the Group had cash resources of US$40.4 million (31 December 2017: US$50.7 million) and no debt.

Financial review

Stewart MacDonaldChief Financial Officer



19

Cash resources movements during the year:

US$m

Opening cash balance (31 December 2017) 51Revenues 11Cost of sales (5)Falkland Islands (11)Greater Mediterranean (4)Admin and miscellaneous (2)Closing cash balance (31 December 2018) 40

Falkland Islands spend of US$11.0 million relates primarily to pre-development activities on Sea Lion (2017: US$6.7 million).

Spend in the Greater Mediterranean largely relates to the Egyptian drilling campaigns at Abu Sennan and El Qa’a Plain.

Admin and miscellaneous includes G&A, foreign exchange, movements in working capital balances as well as a non-recurring VAT credit received during the period.

Impairment of oil and gas assetsRockhopper has tested the carrying value of its assets for impairment. Carrying values are compared to the value in use of the assets based on discounted cash flow models. Future cash flows were estimated using an oil price assumption equal to the Brent forward curve during the period 2019 to 2020, with a long-term price of US$70/bbl (in “real” terms) thereafter. A post-tax nominal discount rate of 10% and 12.5% was used for the Group’s Greater Mediterranean and Falkland Islands assets respectively. With no cash flow generation expected from Sea Lion until 2022 at the earliest, the impact of the Brent forward curve during the period 2019 to 2020 on the fair value calculation is limited. As such, no impairment arises on the Sea Lion project. A range of sensitivities have been considered as part of the impairment testing process. Even in the event of a US$20 per barrel reduction in the Group’s long-term oil price assumption, no impairment on Sea Lion arises. Equally, no impairment would arise even if the Group assumed project sanction was delayed by seven years.

Mergers, acquisitions and disposalsOn 8 June 2017, Rockhopper announced the conditional disposal of a portfolio of non-core interests onshore Italy to Northern Petroleum Plc (“Northern”). Northern has subsequently undertaken a corporate name change to Cabot Energy plc (“Cabot”). Following failure to satisfy all relevant conditions precedent, including receipt of requisite regulatory approvals in Italy, the Company and Cabot have mutually agreed not to proceed with the transaction. As a result, Rockhopper retains the benefit of the positive cash flows generated from the Civita portfolio which, had the transaction proceeded, would have been paid to Cabot.

TaxationOn the 8 April 2015, the Group agreed binding documentation (“Tax Settlement Deed”) with the FIG in relation to the tax arising from the Group’s farm out to Premier Oil. The Tax Settlement Deed confirms the quantum and deferment of the outstanding tax liability and is made under Extra Statutory Concession 16. As a result of the Tax Settlement Deed, the outstanding tax liability was confirmed at £64.4 million and is payable on the earlier of: (i) the first royalty payment date on Sea Lion; (ii) the date of which Rockhopper disposes of all or a substantial part of the Group’s remaining licence interests in the North Falkland Basin; or (iii) a change of control of Rockhopper Exploration plc.

During the first half of 2017, as a result of the Group receiving the full Exploration Carry from Premier during the 2015/16 drilling campaign, the Falkland Islands Commissioner of Taxation agreed to reduce the tax liability in line with the terms of the Tax Settlement Deed. As such, the tax liability has been revised downwards to £59.6 million.

Due to the movement in the Sterling:US dollar exchange rate, the outstanding tax liability in US dollar terms has reduced to US$76.1 million (31 December 2017: US$80.6 million). The outstanding tax liability is classified as non- current and is discounted to a year-end value of US$37.9 million.



Full details of the provisions and undertakings of the Tax Settlement Deed were disclosed in the Group’s 2014 Annual Report and these include “creditor protection” provisions including undertakings not to declare dividends or make distributions while the tax liability remains outstanding (in whole or in part).

BrexitIt is the view of the Board that, given the Group’s focus on the North Falkland Basin and Greater Mediterranean region, Rockhopper’s business, assets and operations will not be materially affected by Brexit. Rockhopper derives a significant proportion of its revenue from crude oil, a globally traded commodity priced in US dollars.

Liquidity, counterparty risk and going concernThe Group monitors its cash position, cash forecasts and liquidity on a regular basis and takes a conservative approach to cash management, with surplus cash held on term deposits with a number of major financial institutions.

Following the Group’s acquisition of production and exploration assets in Egypt, the Group is exposed to potential payment delay from EGPC, which is an issue which has historically been common to many upstream companies operating in the country. As at 31 December 2018, Rockhopper’s EGPC receivable balance was approximately US$1.3 million.

Cash forecasts are regularly produced based on, inter alia, the Group’s production and expenditure forecasts and management’s best estimates of future commodity prices. Sensitivities are run to reflect different scenarios including changes in production rates, possible reductions in commodity prices and increased costs. Management’s base case forecast assumes an oil price of US$65/bbl in 2019 and 2020, production in line with prevailing rates and expenditures in line with approved budgets. The Group has run downside scenarios, where oil prices are reduced by a flat $10/bbl throughout the going concern period and where cost expenditures have increased by 5%.

Under the base case forecast and the downside scenarios run, the Group will have sufficient financial headroom to meet forecast cash requirements for the 12 months from the date of approval of the 2018 financial statements. However, beyond the 12 month going concern assessment depending on the timing of sanction for the Sea Lion development, in the absence of any mitigating actions, the Group may have insufficient funds to meet its forecast cash requirements. Potential mitigating actions could include non-core asset disposals, collection of arbitration award proceeds, deferral of expenditure or raising additional equity.

Accordingly, after making enquiries and considering the risks described above, the Directors have assessed that the cash balance held provides the Group with adequate headroom over forecasted expenditure for at least the following 12 months – as a result, the Directors have adopted the going concern basis of accounting in preparing the annual financial statements.

Principal risk and uncertaintiesA detailed review of the potential risks and uncertainties which could impact the Group are outlined elsewhere in this Strategic Report. The Group identified its principal risks at the end of 2018 as being:

> sustained low oil price; > joint venture partner alignment and funding

issues, both of which could ultimately create a delay to the Sea Lion Final Investment Decision; and

> insufficient liquidity and funding capacity in the event of a protracted delay to the Sea Lion Final Investment Decision.


1 April 2019



The Board is responsible for establishing and maintaining the system of internal controls which has been in place throughout 2018.

The Directors are responsible for the Group’s system of internal control and for reviewing its effectiveness. The Group’s system of internal control is designed to manage rather than eliminate the risk of failure to achieve the Group’s business objectives and therefore provides reasonable, rather than absolute, assurance against material misstatement or loss.

The Group operates a series of controls to meet its needs. The Group receives reports from the external auditor concerning the system of internal control and any material control weaknesses. The Board considers that there is no necessity at the present time to establish an independent internal audit function given the current size and complexity of the business. However, an initial internal audit review was conducted during 2016 using an independent third party audit firm.

That review focused on the Group’s financial controls and encompassed the key financial transaction cycles including:

> capital projects > monthly financial reporting > bank and treasury > revenue to receivables.

During 2017 an independent assessment of the Group’s progress against those items identified during the 2016 initial assessment was conducted – the conclusion of such review was that material progress had been made while some areas remain open to improvement.

A further review of the Group’s financial controls will be conducted in the event of a material change of the Group (which could include a material acquisition or project sanction of the Sea Lion project).

The process of monitoring and updating internal controls and procedures continues throughout the year and a risk management process is in place. Existing processes and practices are reviewed to ensure that risks are effectively managed around a sound internal control structure.

A fundamental element of the internal control structure involves the identification and documentation of significant risks, the likelihood of those risks occurring, their potential impact and the plans for managing and mitigating each of those risks. These assessments are reviewed by the Board. The plans are discussed, updated and reviewed at each board meeting, and any matters arising from internal reviews or external audit are also considered.

Internal controls and risk management

Overall responsibility

Review and confirm

Identification, mitigation and implementation

> Overall responsibility for risk management and internal control

> Defines risk appetite> Reviews principal risks

register

> Monitors, reviews and confirms Company’s risk management system and internal controls

> Risk assessment, identification and mitigation

> Implementation of risk management system and internal control

Rockhopper Board

Audit & Risk Committee

Senior Management



Principal risks and uncertainties

Strategic risks Description Impact Mitigants Recent changes and ongoing initiatives

Financial risks Description Impact Mitigants Recent changes and ongoing initiatives

Delay in Sea Lion Final Investment Decision (due to low oil price outlook, increased project costs or partner funding issues) and potential loss of licence interests.

Insufficient liquidity and funding capacity.

Uncertainty and volatility of commodity prices.

Uncertainty of fiscal regime and regulatory requirements; Sea Lion remains the only commercial oil discovery declared in the Falkland Islands.

Failure by JV partners to fund their financial obligations.

Recoverability of receivables and exposure to foreign exchange.

The sovereignty of the Falkland Islands is disputed.

> Increased costs> Delay in future cash flow> Reduced value creation> Loss of investor confidence> In extremis, potential loss of licence interests.

> Uncertain financial outcome> Inability to meet financial obligations> Restricted work programmes due to lack of capital.

> Impact on expected future revenues, margins, cash flows and returns

> Impact on future debt capacity.

> Schedule risk> Loss of value> Uncertain financial outcome.

> Increased costs> Potential failure to meet financial and operational

obligations> In extremis, potential loss of licence interests.

> Uncertainty on timing of receipt and currency of payments.

> Open aggression is not expected> Certain service providers and financial institutions

may choose not to provide services for fear of the impact an association may have on their business in Argentina.



Strategic risks Description Impact Mitigants Recent changes and ongoing initiatives

Financial risks Description Impact Mitigants Recent changes and ongoing initiatives

> Active engagement with the operator and regulators to establish constructive and trusted working relationships

> Active participation in technical meetings to challenge, influence and/or support partners to establish a cohesive JV view and decision making

> Active support to operator in its objective of securing funding for the project.

> Short-term and long-term cash forecasts are reported to the Board on a regular basis

> The Company has no debt> Through the 2012 farm-out and subsequent revisions, Rockhopper

secured a $337m Development Carry for the initial phase of development of Sea Lion, a $337m Development Carry for the subsequent phase of development of Sea Lion and a $750m Standby Loan facility from Premier Oil

> Agreement reached to defer tax liability associated with 2012 farm-out.

> Contingency built into planning and budgeting process to allow for downside movements in commodity prices

> Sustained low oil prices typically lead to a reduction in activity levels with a resultant reduction in industry development and exploration costs

> The Company may consider it appropriate in the future to hedge a proportion of its production, particularly if the Company is reliant on such production to service debt.

> Maintain positive relationships with host governments and key stakeholders through regular dialogue and engagement

> Legal agreements in place to protect interests> Seek appropriate legal and tax advice if required.

> Partner selection is a critical component of any investment decision> Joint Operating Agreements and other commercial arrangements

provide legal protections in the event joint venture partners fail to meet their obligations.

> Active engagement with EGPC and joint venture partners to manage payments and the Company’s foreign currency liquidity

> Monitor macro-economic environment and lobby through established relationships if required

> Active treasury management to minimise funds held in foreign currencies and match with creditor balances.

> The British Government has issued strong rebuttals to the Argentine claims

> The Company is in regular contact with the Foreign & Commonwealth Office

> In a referendum, conducted in 2013, the Falkland Islands voted unequivocally to remain as a British Overseas Territory.

> Field Development Plan and EIS substantially agreed with Falkland Islands Government. Formal approval expected at sanction

> Letters of Intent for provision of services and financing signed with set of world class contractors

> Ongoing engagement with providers of senior debt including project finance banks and export credit agencies. PIM submission in Q2 2019

> The Company’s balance sheet remains strong with cash at 31 December 2018 of $40 million and no debt

> Corporate and operating costs funded by revenues from the Company’s Greater Mediteranean portfolio in 2018.

> As a result of the low oil price environment experienced over the last few years, industry and service costs have reduced and, through the Sea Lion FEED process, significant cost reductions have been achieved.

> Significant payments received from EGPC during 2018.

> In September 2016, the British Government and the Government of Argentina agreed a joint statement on areas of cooperation, including working towards removing restrictive measures affecting the oil & gas industry in the Falkland Islands

> Further to the September 2016 joint statement, a second commercial air link between South America and the Falklands has been agreed and is expected to commence operations in 2019

> During 2018, good progress was made with the Falkland Island Government in relation to a range of commercial, fiscal and regulatory matters.

> Active engagement with joint venture partners to ensure alignment

> Ongoing monitoring and regular review of the Company’s financial exposure to joint venture partner credit risk.

Reliance on JV operators for asset performance.

Health, safety, environment and security incidents.

Staff recruitment, development and retention.

The assumptions used to estimate hydrocarbon resources may prove incorrect or inaccurate.

> Cost and schedule overruns> Poor performance of assets> HSE performance.

> Serious injury or death> Environmental impacts> Loss of reputation> Regulatory penalties.

> Disruption to business> Loss of key knowledge and experience.

> Exploration and appraisal efforts may target ultimately uncommercial volumes of hydrocarbons.



Operational risks Description Impact Mitigants Recent changes and ongoing initiatives

HSE and security risks Description Impact Mitigants Recent changes and ongoing initiatives

Organisational risks Description Impact Mitigants Recent changes and ongoing initiatives

> Actively engage with all JV partners to establish trusted working relationships

> Active participation in technical meetings to challenge, apply influence and/or support partners to establish a cohesive JV view and decision making.

> Regular review of HSE policies and procedures to ensure full compliance with industry “best practice” as well as all appropriate international and local rules and regulations

> Emergency and oil spill response procedures regularly tested> Third party specialists in place to assist with security

arrangements and travel risks where appropriate.

> Training and development opportunities are considered for all staff

> Executive directors and senior staff have notice period of between 6 and 12 months to ensure sufficient time to handover responsibilities in the event of a departure

> Succession planning considered regularly at Board level > The Remuneration Committee regularly evaluates

compensation and incentivisation schemes to ensure they remain competitive.

> The Company employs qualified and experienced technical personnel

> External consultants are regularly commissioned to support technical evaluations or provide independent assessments

> A prudent range of possible outcomes are considered within the planning and budgeting process.

> Active involvement by the Company in the evaluation and selection of contractors for the Sea Lion project

> Active involvement by the Company in the identification, evaluation and ultimate selection of well locations for the Company’s forthcoming drilling campaign in Egypt.

> In 2017, the Company successfully completed the removal of the Ombrina Mare tripod structure – understood to be one of the first decommissioning exercises completed in Italian waters and fulfilling all required regulatory and authorisation processes.

> A short-term succession plan is in place for executive directors and key staff members.

> Analysis of commerciality thresholds is inherent in exploration planning and licence acquisition analysis

> In May 2016 the Company announced completion of an independent audit of the contingent and prospective resources in licences PL032 and PL004 in the North Falklands Basin

> Company estimates of recoverable oil & gas resources are generally consistent with those held by the operator and other independent assessments or audits.



Operational risks Description Impact Mitigants Recent changes and ongoing initiatives

HSE and security risks Description Impact Mitigants Recent changes and ongoing initiatives

Organisational risks Description Impact Mitigants Recent changes and ongoing initiatives



Health, safety, environmental and social management

Rockhopper’s strategy is to explore, appraise and develop its operated and non operated acreage both safely and responsibly. The two key elements of this strategy involve maintaining high standards of Health, Safety and Environmental (HSE) protection throughout its operations and communicating clearly with its stakeholders, both operational and within the local community.

Maintaining high standards of Health, Safety and Environmental (HSE) protection is achieved through:

> Strong leadership and clearly defined responsibilities and accountabilities for HSE at all levels of the organisation;

> Selection of competent personnel to manage activities;

> Compliance with regulatory and other applicable requirements, or where regulations do not exist, application of industry standards;

> Identifying, assessing and managing HSE risks and preventing pollution;

> Developing specific HSE plans for each operational project;

> Selecting competent contractors and ensuring that they are effectively managed;

> Preparing and testing response plans to ensure that any incident can be quickly and efficiently controlled, reported and investigated to prevent recurrence;

> Continual improvement of HSE performance through monitoring, regular reporting and periodic audits; and

> Periodic management reviews to identify and implement improvements to our HSE systems.

This policy is implemented through our HSE Management System, which has been prepared to be consistent with international standards for HSE management including ISO14001 and ISO18001.

Our HSE Management System is used to guide all our activities and will not be compromised by other business priorities. Application of the HSE Management System will include preparation of detailed Environmental Impact Statements (“EISs”) for all of the Group’s activities. The preparation of the EIS includes consultation with interested parties and the local Government as well as public meetings to present findings and obtain feedback from the local community. For our non operated ventures one of our key roles is to seek to ensure (wherever possible) that the operator maintains high standards of HSE protection in line with our management systems.

Operational stakeholdersWhere we have operating responsibility all contractors are selected taking into account their skills, experience and HSE performance. There is a contractor selection and management section in the HSE management system and we are closely involved in day-to-day operations and closely monitor contractor performance.

Local community stakeholdersThe Falkland Islands has a population of approximately 3,000 people and each member is considered a stakeholder in the Group’s strategy. We recognise that a key element in maintaining stakeholder support is regular communication at all levels. Our primary point of contact is the Falkland Islands Government Department for Mineral Resources and since inception we have had good communication with all of the team there. Since the start of operations, we have increasingly liaised with other government departments, such as the Secretariat and the Tax Office as well as the Governor.

In the Greater Mediterranean region we maintain regular dialogue with various operators, regulators, local communities and other stakeholders to build constructive relationships and support.

Approval of Strategic ReportThis Strategic Report was approved by the directors and signed on their behalf on 1 April 2019 by:

Samuel Moody Chief Executive Officer

HSE MANAGEMENT SYSTEM

Health and Safety

Environment

Business conduct

Employees

Local communities


Rockhopper Exploration plc Governance Report

Rockhopper Board

Shareholders

Nomination Committee

Remuneration Committee

Audit & RiskCommittee

External Auditors

Board of Directors

Day-to-day running of Rockhopper

Chief Executive Officer

Executive Committee

Ongoing dialogue

Board composition and succession

Framework and individual Director packages

Findings and recommendations in relation to financial

reporting

Integrity of financial information and internal controls

How your Board works

Non-executive director tenure

Company composition – 19 employees as at 31 December 2018

< 3 years

25%3-6 years

50%6-9 years

25%

63% British 21% Italian 11% Egyptian 5% Other EU nationals

Female47%

Male53%

Corporate diversity


Rockhopper Exploration plcGovernance Report

Board of Directors

Samuel MoodyChief Executive Officer 49

Sam is a co-founder of Rockhopper and has been responsible for building and managing the group from its formation in early 2004.

He previously worked in several roles within the financial sector, including positions at AXA Equity & Law Investment Management and St Paul’s Investment Management.

Stewart MacDonaldChief Financial Officer 38

Stewart has 17 years of energy and corporate finance experience.

Prior to joining Rockhopper, Stewart was a Director in Rothschild’s global oil and gas group and spent 12 years advising clients in the sector on a range of M&A transactions as well as debt and equity financings.

David McManusChairman 65

David is a petroleum engineer with a degree from Heriott Watt University with over 35 years experience in the oil and gas industry, with Shell, Ultramar, ARCO, BG Group and Pioneer.

—

Director: > Greenland Gas

& Oil Limited

—

—

> Nomination (Chairman)

Chairman: > FLEX LNG> Verus Petroleum UK

Limited (private)Director: > Hess Corporation> Costain plc

Committee membership:

External appointments:

Skills and experience

Directors



Keith LoughSenior Independent Director 60

Keith has over 30 years experience in the natural resources sector in both senior finance and general management roles with LASMO, Petrokazakhstan, British Energy and Hutton Energy. He was also a founder shareholder and CEO of unconventional gas explorer Composite Energy Limited.

Keith was previously Chairman of Gulf Keystone Petroleum.

> Audit & Risk (Chairman)> Remuneration> Nomination

Director: > Cairn Energy plc> UK Gas and Electricity

Markets Authority > Hunting PLC

Tim BushellNon-Executive Director 59

Tim is a qualified geologist with more than 30 years’ experience in the oil and gas industry. He worked at Ultramar, British Gas and Schlumberger and was with LASMO for 10 years where his roles included General Manager of its South Atlantic business unit which participated in the drilling campaign in the North Falkland Basin in 1998. Tim was Managing Director, Norway at Paladin Resources plc from 2001 until joining Falkland and Gas Limited in 2006 where he was Chief Executive Officer.

> Audit & Risk> Remuneration (Chairman)> Nomination

Deputy Chairman:> Wentworth Resources plc

Director: > Petro Matad Limited> Genel Energy plc> Redrock Energy Limited

(private)

John SummersNon-Executive Director 63

Dr John Summers is a geologist with degrees from the University of Liverpool. He worked for British Gas/BG Group plc for 29 years holding a variety of roles from Exploration Manager, Vice President Exploration, Chief Geologist, General Manager Technology and Performance and VP New Ventures.

> Audit & Risk > Remuneration> Nomination

—

Alison BakerNon-Executive Director 48

Alison has 25 years’ experience in provision of audit, capital markets and advisory services. She previously led UK and EMEA Oil & Gas practice at PricewaterhouseCoopers and prior to that the UK Energy, Utilities and Mining Assurance practice at Ernst & Young.

> Audit & Risk> Remuneration> Nomination

Director: > KAZ Minerals PLC> Centamin plc



Senior management team

Lucy WilliamsGeoscience Manager

> Chartered geologist and currently Chairman of the Petroleum Group of the Geological society

> Geoscientist with 25 years exploration and development experience> 11 years with Chevron during which time she was Lead Development

Geologist on the 4.5Tcf Britannia gas condensate field in the North Sea > Subsurface Manager of the Songo Songo gas field; at the time Tanzania’s

only producing field> Worked on a variety of geologic basins across the world> Joined Rockhopper in June 2011, initially to assist with construction

of first Sea Lion geomodels.

Paul CulpinDevelopment Manager

> Over 40 years experience of oil and gas field development and operations> Worked with Rockhopper since 2010 initially as a consultant before

joining full time in 2011> Previous roles with Exxon, Mobil, Enterprise Oil, Burlington Resources

and Newfield Petroleum> Worked in many areas of the world and has been a part of the senior

management team for three international green field oil and gas development projects including Bijupira-Salema FPSO offshore Brazil.

Alun GriffithsReservoir Engineer and Sea Lion Asset Manager

> Chartered Engineer> Over 35 years Petroleum Engineering experience > Worked with Rockhopper since 2010, initially as a consultant

and joined full time in 2015> Previous roles with Shell, Intera-ECL and Schlumberger,

then spent 16 years working as a freelance reservoir engineer for a wide variety of international clients.

Jan DaviesCompany Secretary

> Qualified Company Secretary with law degree> Joined Rockhopper as a consultant in 2010 and became

an employee in 2011> Over 20 years experience in the independent oil and gas sector> Previous roles with Monument Oil and Gas, Indago Petroleum

and Serica Energy.

Will PerryGroup Financial Controller

> Fellow of the Institute of Chartered Accountants England and Wales > Worked with Rockhopper since 2010 before joining full time in 2011> Joined from Smith & Williamson where he was a senior manager

with a portfolio of clients from a range of industries including those in the oil and gas sector.

Rockhopper has an experienced and highly capable senior management team.



Corporate governance statement

Introduction from the Chairman on the Governance ReportThe Company is an AIM listed company and is required to apply a recognised corporate governance code. Historically, the Board’s corporate governance policy had been to observe the provisions of the 2016 UK Corporate Governance Code (the “UKCG Code”) applicable to FTSE 350 companies as far as practicable given the size of the Company. During 2018, the Board undertook a review of the provisions of both the UKCG Code and the Quoted Companies Alliance Corporate Governance Code (the “QCA Code”) to assess which corporate governance code was appropriate for the Company at this stage in its development. The Board concluded that the QCA Code, which is designed for small to mid-sized companies and which has been adopted by many AIM companies, was the appropriate code to adopt.

The Board has considered how the Company applies the ten principles of the QCA Code and the Governance Report includes the required disclosures and explanations. Further details of the Company’s corporate governance practices are provided on the Company’s website under the corporate governance section of the AIM rule 26 disclosure.

Corporate Governance Statement The Board recognises that good governance supports the execution of the Company’s strategy and delivery of shareholder value. Rockhopper’s Board, led by the Chairman, is committed to maintaining high standards of corporate governance and to ensuring that the Company’s values are promoted and its strategy clearly communicated across the Group and to shareholders and stakeholders.

Corporate culture Rockhopper has a small, experienced and diverse team of employees most of whom hold shares in the Company. The Board promotes a culture of openness and transparency and staff understand, and are fully committed to delivery of, the corporate objectives.

The Company is committed to ensuring that there is a healthy corporate culture and has put in place a number of policies and procedures which are designed to ensure that ethical and transparent behaviour is recognised and followed across the Group. These include the HSE Policy, Code of Business Conduct and Social Responsibility, Anti-Bribery and Corruption Policy and Procedures and Share Dealing Code.

Board compositionThe Board currently consists of a Non-Executive Chairman and two Executive and four Non-Executive Directors including the Senior Independent Director. The Chairman will retire at the 2019 Annual General Meeting and will be replaced by Keith Lough. During 2018, John Martin retired as a Non-Executive Director and Alison Baker was appointed to the Board as a Non-Executive Director.

The Board considers that the Chairman and the Non-Executive Directors are all independent. Other than any shareholdings in the Company and the receipt of fees for acting as Directors, the Chairman and Non-Executive Directors have no financial interests in the Company or business relationships that would interfere with their independent judgement.

Keith Lough was the Senior Independent Director throughout 2018 and will be replaced by Alison Baker when he takes over as Chairman.

Board composition during the year Length of Date of Date of Name Role Independent service appointment resignation

Non-executives

David McManus Chairman Yes 8 years, 6 months 30 September 2010 —

Keith Lough Senior Independent Director Yes 5 years, 3 months 14 January 2014 —

Tim Bushell Non-Executive Director Yes* 3 years, 3 months 18 January 2016 —

John Summers Non-Executive Director Yes 5 years, 2 months 1 February 2014 —

Alison Baker Non-Executive Director Yes 0 years, 7 months 18 September 2018 —

John Martin Non-Executive Director Yes 2 years, 4 months 18 January 2016 18 May 2018

Executives

Sam Moody Chief Executive Officer No 14 years, 2 months 21 February 2005 —

Stewart MacDonald Chief Financial Officer No 5 years, 1 month 10 March 2014 —

* Tim Bushell was previously Chief Executive Officer at Falkland Oil and Gas Limited and had a short-term consultancy arrangement with the Company in respect of the integration of the business of FOGL which came to an end in July 2016. The Board considers him to be independent as he has demonstrated independence of character and judgement since joining the Board and the Board considers that there are no circumstances which are likely to affect, or could appear to affect, his judgement.

All the Directors are subject to annual re-election by shareholders at the Annual General Meeting and each Director is subject to election by shareholders at the first Annual General Meeting following their appointment. With the exception of David McManus, all Directors will be standing for election or re-election at the 2019 Annual General Meeting.

Role of the BoardThe Board is collectively responsible for delivery of the strategy which is designed to promote the long-term success of the Company and to deliver shareholder value. The Board is responsible for monitoring progress against the agreed strategic objectives and ensuring that major business risks are actively monitored and mitigated where appropriate. There is a schedule of matters reserved for the Board to ensure that the Board exercises control over the key matters which could impact on delivery of the Company’s strategy. Details are provided on the Company’s website under the corporate governance section of the AIM rule 26 disclosure.

Board skills and responsibilities The Directors have a wide range of experience and skills across the oil and gas industry including technical, operational, commercial and financial both in the UK and internationally. Each of the Non-Executive Directors have held senior management/board/advisory positions in the industry and bring relevant experience from their current and previous positions.

There is a clear division of responsibilities between the Chairman and Chief Executive Officer which is set out in writing and has been approved by the Board. Details are given on the Company’s website. A clearly defined organisational structure exists across the Group, with lines of responsibility and delegation of authority to executive management.

Senior Independent DirectorThe main responsibilities of the Senior Independent Director are as follows:

> to provide a sounding board for the Chairman and act as an intermediary for Board members;

> to act as a point of contact for shareholders who have concerns which have not been adequately addressed by the Chairman or Executive Directors; and

> to co-ordinate the Chairman’s appraisal.

Board meetings and processesThe Board has between six and seven scheduled formal meetings each year with other meetings held as required. The Chairman facilitates an annual strategy review and meets regularly with the Non-Executive Directors without the Executive Directors present.

At the beginning of each Board meeting, the Board receives an update from the CEO on key current activities and issues together with Operations and Finance Reports and any papers relating to specific matters requiring consideration or approval. The Board considers any changes to the principal risks facing the Group at the start of the meeting and discussions take place in this context.





The appointment letters of the Non-Executive Directors detail the expected time commitment which is around 20 days a year. The Non-Executive Directors undertake on joining the Company that they are able to allocate sufficient time to discharge effectively their responsibilities and are required to keep the Board updated of any changes in respect of their other commitments.

Board meeting attendance Additional Scheduled Board short notice Name meetings Board meetings

David McManus 7/7 1/1Sam Moody *6/7 1/1Stewart MacDonald 7/7 1/1Keith Lough 7/7 1/1Tim Bushell 7/7 0/1John Summers 7/7 1/1Alison Baker 2/2 1/1(appointed 18 September 2018) (1 as invitee)

Former Director

John Martin (resigned 18 May 2018) 3/3 0Total meetings during year 7 1

* Absent due to family bereavement.

Board performance evaluation An internal performance evaluation of the Board and its committees and an appraisal of the Chairman’s performance is undertaken each year according to the following processes:

Board Board members review a questionnaire which is focused on strategy, risks, performance against objectives, board processes, relationships and communication and Board structure and development. The key conclusions are discussed at a Board meeting and follow up action is agreed if necessary.

In addition to the internal performance evaluation, an external performance evaluation of the Board was undertaken in 2016 with specific focus on the skillset and structure of the Board which was used as the basis for discussions on succession planning.

Chairman The Senior Independent Director consults each individual Director for their view on the Chairman’s performance and feeds back any issues to the Chairman/Board as appropriate.

Audit & Risk Committee

The Chairman of the Audit & Risk Committee/Senior Independent Director and Company Secretary review the performance of the Audit & Risk Committee based on the Financial Reporting Council’s guidance to listed companies on the composition, role and responsibilities of the audit committee. The key conclusions are discussed by the Audit & Risk Committee and follow up action is agreed if necessary.

Board induction, training and outside adviceThere is no formal induction process in place but new Directors receive an appropriate induction according to their requirements. During the year Alison Baker received an induction which included the following:

Board Board papers and minutes for prior 12 months

Schedule of matters reserved for the Board

Delegated financial authorities

Committees Terms of reference for all Board Committees

Minutes of relevant Committee meetings for prior 12 months

Policies Copies of current policies and procedures including Anti-Bribery and Corruption, Code of Business Conduct, Share Dealing Code, Internal Control and Financial Procedures and Market Abuse Regulation

Organisation Group structure chart

Governance Briefing on AIM obligations from the NOMAD

Commercial Management summaries of key transactions

Insurance Details of Directors’ and officers’ liability cover

Shareholders Overview of the breakdown of the share register including details of major shareholders



New directors are also encouraged to meet with members of the senior management team to get a thorough understanding of the Group’s assets and operations.

The Board supports Directors who wish to receive ongoing training and education relating to their duties.

Independent legal advice is available at the Group’s expense if necessary.

External directorships and interests Executive Directors are permitted to engage in other activities and businesses outside the Group providing that there is no risk of conflict with their executive duties and subject to full Board disclosure.

Non-Executive Directors are required to advise the Chairman as soon as practicable of any proposed Board appointments which could give rise to a conflict with their position as a Director of the Company.

Conflicts of interest The Board has in place a procedure for dealing with the consideration and authorisation of any actual or potential conflicts of interest. All Directors are aware of the requirement to advise the Chairman and Company Secretary of any situations which could give rise to a conflict or potential conflict of interest.

Company Secretary The Board has a qualified Company Secretary and all Directors have access to her for advice and services. The Company Secretary ensures that the Board and its Committees are supplied with papers of sufficient quality to enable them to consider matters in good time for meetings and to discharge their duties properly.

The Company Secretary also facilitates the induction of new directors and is responsible for providing advice to the Board, through the Chairman, on corporate governance matters.

Communication with shareholders The Company engages with shareholders in a variety of ways:

Meetings Executive Directors meet regularly with major shareholders and the investment community which allows exposure to new investors. This process includes presentations, one-to-one meetings, analyst briefings and press interviews. The Chief Executive Officer regularly briefs the Board on these contacts and relays the views expressed. Copies of analyst research reports, press reports and industry articles are circulated to all Directors and ensures that the Board is aware of the views of its major shareholders

Website The Company’s website is updated regularly with external presentations and corporate updates which ensures that existing and potential investors have access to up to date and relevant information

Annual Report

The Company’s annual report gives a detailed overview of the Company’s strategy, operations, financial position, risk profile, corporate governance practice and remuneration structure and is available in hard copy and on the website. This ensures that existing and potential investors are provided with the information that they need to make an assessment of the Company’s performance and prospects

AGM The AGM is attended by all Directors. The Chairman gives an overview of the Company’s performance in the period since the previous AGM and the Chief Executive Officer gives a detailed operational and financial update. The AGM is mainly attended by retail investors and gives them the opportunity to address questions to the Board.

David McManusChairman

1 April 2019



Introduction by the Audit & Risk Committee Chairman, Keith LoughI am pleased to present the report of the Audit & Risk Committee for the year ended 31 December 2018 which includes details of the committee’s activities during the financial year and since the year end.

I will be stepping down as Chairman of the committee at the 2019 Annual General Meeting when I will take up the position of Chairman of the Company. I will be succeeded by Alison Baker who is a qualified chartered accountant. This will also be the last audit of the financial statements by KPMG LLP in line with best practice given their nine year tenure and the conclusion of the audit partner’s five year term. After a tender process overseen by the committee, the Board has approved the appointment of PricewaterhouseCoopers LLP as the Company’s auditor for the financial year commencing 1 January 2019 subject to approval by shareholders of the Company at the 2019 Annual General Meeting.

Committee compositionThe members of the Audit & Risk Committee are Keith Lough as Chairman, Tim Bushell, Alison Baker and John Summers. Alison Baker was appointed to the Audit & Risk Committee in September 2018. The Board considers all the members of the Committee to be independent and is satisfied that the Committee membership has sufficient recent and relevant financial experience.

Alison Baker will replace Keith Lough as Chairman of the Audit & Risk Committee with effect from the date of the 2019 Annual General Meeting.

The Company Secretary acts as secretary of the committee.

Meetings The Audit & Risk Committee met twice during the year and informal discussions were also held both with and without management present. The external auditor met and had discussions with the Chairman of the committee during the course of the year. The external auditors also met with the committee without management present.

Only members of the committee have the right to attend the meetings of the committee but the committee can request the Chairman of the Board, Executive Directors, members of senior management and the external auditors to attend its meetings.

Following each meeting, the Chairman of the committee reports formally to the Board on the main matters discussed by the committee.

Details of the meetings attended during the financial year were as follows:

Audit & Risk Committee Director meetings attended

Keith Lough – Chairman 2/2Tim Bushell 2/2John Summers 2/2Alison Baker (appointed 0* 18 September 2018) S MacDonald †2D McManus †2Former Director

John Martin (resigned 18 May 2018) 1*Total meetings during year 2† Invitee* There were no committee meetings held after Alison Baker’s appointment

and John Martin resigned as a director prior to the September committee meeting

Role The core terms of reference of the Audit & Risk Committee include reviewing and reporting to the Board on matters relating to:

> the audit plans of the external auditor; > the Group’s overall framework for financial

reporting and internal controls; > the Group’s overall framework for risk

management; > the accounting policies and practices of the

Group; and > the annual and periodic financial reporting

carried out by the Group.

The committee is responsible for notifying the Board of any significant concerns that the external auditor may have arising from their audit work, any matters which may materially affect or impair the independence of the external auditor, any significant deficiencies or material weaknesses in the design or operation of the Group’s internal controls and any serious issues of non-compliance. No such concerns were identified during the financial period.

Audit & Risk Committee Chairman’s report



The Audit & Risk Committee’s terms of reference are available on the Company’s website and on request from the Company Secretary.

Key matters considered by the committee During the year, the issues considered by the committee included:

> Group financial disclosures and accounting matters including impairment and going concern;

> reports of the external auditor concerning its audit and review of the financial statements of the Group and the status of follow-up actions with management;

> external auditor’s audit fees;> effectiveness of the Group’s system of internal

controls and risk management and the systems and processes that management has developed pertaining to risk identification, classification and mitigation including disaster recovery;

> outcome and recommendations of the external review of internal financial controls including the creation of a Financial and Accounting Procedures manual;

> corporate governance practice and disclosure;> implementation of the General Data Protection

Regulation 2016/679;> tender process for the provision of audit services

to the Group;> whistleblowing procedures and shareholder

concerns.

Going concernAs part of the year end reporting process, management prepares a detailed report including detailed cashflow forecasts with a number of potential scenarios and sensitivity assumptions. The committee reviews and challenges management’s assumptions and conclusions in order that it can provide comfort to the Board that management’s assessment has been challenged and is supported and that it is appropriate to prepare the financial statements on a going concern basis. Further details of the going concern assessment process are contained in Note 1 of the Group financial statements on page 59.

External auditorsThe committee recommends to the Board the appointment of the external auditor, subject to the approval of the Company’s shareholders at a general meeting. Shareholders in a general meeting authorise the Directors to fix the remuneration of the external auditor.

The committee is responsible for the approval of the provision of all audit services and permitted non-audit services undertaken by the external auditor. In general, the external auditor will only be used for audit, audit related and tax compliance services. The policy on the provision of non-audit services requires that the committee considers each piece of work on a case by case basis. The only non-audit services provided during the period were in relation to tax compliance and review of the half yearly report. The status of all services provided by the external auditor are monitored and the committee is satisfied that there were no conflicts during the financial period. The committee was satisfied throughout the financial period that the objectivity and independence of the external auditor were not in any way impaired by the nature of the non-audit work undertaken, the level of non-audit fees charged for such work or any other factors.

Audit & Risk Committee performance The Chairman of the committee and Company Secretary undertake an annual review of the committee’s performance and effectiveness with reference to the Financial Reporting Council’s guidance to listed companies on the composition, role and responsibilities of the audit committee. The key conclusions are discussed by the committee and follow up action is agreed if necessary.

Since the year end, the performance review has been completed. The committee concluded that, having considered the size and complexity of the business, the terms of reference continued to be appropriate and that the committee was performancing effectively.



Whistleblowing and Anti-BriberyThe Company has in place a whistleblowing policy and procedure which encourages staff to raise in confidence any concerns about business practices.

The Company is committed to conducting all of its business dealings in a responsible, honest and ethical manner. All employees, directors and consultants are required to have regard to the Company’s Code of Business Conduct and Corporate Social Responsibility in their day to day business behaviour. The Company also has in place Anti-Bribery and Corruption Policy and Procedures which are kept under review and communicated to staff who have joined since the initial training session.

The Chairman of the committee is the contact for shareholders, employees, consultants, contractors or anyone with concerns which they believe have not been adequately addressed by the Chairman or Chief Executive Officer and contact details are given on the Company’s website.

Keith LoughAudit & Risk Committee Chairman

1 April 2019



Introduction by the Nomination Committee Chairman, David McManusI am pleased to present the report of the Nomination Committee for the year ended 31 December 2018 which includes details of the committee’s activities during the financial year.

I will be stepping down as Chairman of the Board at the 2019 Annual General Meeting having served nearly nine years on the Board, three of those as Chairman. I will be succeeded by Keith Lough who will also become Chairman of the Nomination Committee.

Committee compositionThe committee is chaired by the Chairman of the Board with all the Non-Executive Directors as its members. The Board considers all the Non-Executive Directors to be independent.

The Company Secretary acts as secretary of the committee.

Meetings The committee met twice during the year and informal discussions were also held. Only members of the committee have the right to attend the meetings of the committee but the committee can request the attendance of the Chief Executive Officer.

Details of the meetings attended during the financial year were as follows:

Nomination Committee Director meetings attended

David McManus – Chairman 2/2Keith Lough 2/2Tim Bushell 2/2John Summers 2/2Alison Baker (appointed 18 September 2018) 0*Former Director

John Martin (resigned 18 May 2018) 1*Total meetings during year 2* There were no committee meetings held after Alison Baker’s appointment

and John Martin resigned as a director prior to the September committee meeting.

Role The role of the committee is to consider Board member succession, review the structure and composition of the Board and its Committees and identify and make recommendations for any changes to the Board. Any decisions relating to the appointment of Directors are made by the entire

Board based on the merits of the candidates and the relevance of their background and experience, measured against objective criteria, with care taken to ensure that appointees have enough time to devote to the job.

Key matters considered by the committee The issues considered by the committee during the financial year included:

> Board and Board Committees structure and composition

> proposed external directorships of the Non-Executive Directors

> confirmation of the extension of the tenure of Keith Lough and John Summers for a further three year term

> proposed appointment of Alison Baker as a Non-Executive Director

> Board succession with regard to length of tenure and good corporate governance practice.

Succession planning The Company is committed to appointing, retaining and developing an experienced team which can effectively manage the Company’s objectives and deliver its strategy. When considering succession planning, the committee evaluates the balance of skills and experience on the Board and makes recommendations to the Board on the basis of what the Company needs to support delivery of the agreed strategic objectives.

The committee also recognises the need for progressive refreshing of the Board and the benefits of diversity and the committee has regard to these factors when considering succession planning. The committee is committed to recruiting on merit measured against objective criteria.

There is an emergency succession plan in place to cover any unexpected unavailability or departure of the Executive Directors or members of senior management. The management of human resources across the Group is a matter for executive management but the Non-Executive Directors are advised in advance of recruitment plans in respect of senior appointments.

David McManus Nomination Committee Chairman

1 April 2019

Nomination Committee Chairman’s report



Annual statementDear Shareholder

On behalf of the Board, I am pleased to present the Directors’ Remuneration Report (‘Report’) for the year ended 31 December 2018 which has been prepared largely in compliance with the requirements of Schedule 8 of the Large and Medium-sized Companies and Group Regulations 2013.

The Report is divided into two sections:

> The Policy report which sets out the current Remuneration Policy

> The Annual Report on Remuneration which sets out details of the operation of the Remuneration Committee and details of the Directors’ remuneration packages for the year ended 31 December 2018. It also sets out details of the implementation of the Executive Director Remuneration Policy for the year ending 31 December 2019 .

During 2018, the Company agreed to adopt the QCA code as its corporate governance code. The Committee has reviewed the Company’s Remuneration Policy and practices against the principles of the QCA Code and has concluded that they support the delivery of the Company’s strategy but do not encourage any unnecessary risk taking by management. The Committee aims to ensure that remuneration is linked to the performance of the Company. The bonus scheme is based on the Company’s KPIs and the Long Term Incentive Plan, which is based on total shareholder return measured against an appropriate peer group of companies, ensures that management is aligned with shareholders in respect of the share incentive element of their remuneration packages. The Committee is satisfied that the outcomes, in respect of the incentives and remuneration during the financial year under review, are appropriate.

The Committee has agreed some changes to the executive directors’ bonus scheme for 2019 so that individual targets will be introduced for the executive directors in addition to the corporate targets and the executive team will no longer be treated as a team in respect of objective setting and bonus awards. No other substantial changes are proposed to the Remuneration Policy which is laid out on the following pages. The Committee will ensure that the Company’s

Remuneration Policy and practices are kept under review to ensure that they remain appropriate for the Company as it develops and will consider whether it would be appropriate to seek external advice on the Remuneration Policy and structure of remuneration packages.

On behalf of the Board I would like to thank shareholders for their continuing support.

Yours sincerely

Tim Bushell Chairman of the Remuneration Committee

1 April 2019

Remuneration policyThis part of the Report sets out the remuneration policy for the Company. The policy for the Executive Directors is determined by the Committee and the Committee approves any adjustments to salary and bonus awards. The Committee also sets the parameters for the remuneration packages of senior and support staff including the Company Secretary. Authority is delegated to the Chief Executive Officer to implement salary adjustments and make bonus awards for staff within the agreed parameters. The proposals of the Chief Executive Officer in this regard are reviewed by the Chairman of the Committee to ensure that they are in line with the parameters set down by the Committee. The Committee decides on all awards under the Company’s Long Term Incentive Plan (‘LTIP’) and approves the operation of the Company’s Share Incentive Plan (‘SIP’).

The aim of the Committee is to ensure that the remuneration packages are sufficiently competitive to attract, retain and motivate individuals of the quality required to achieve the objectives of the Group and thereby enhance shareholder value. The Committee also aims to ensure that all employees receive rewards that fairly reflect their seniority, level of work and contribution to the Company.

Executive Director PolicyThe summary of the remuneration policy for the Executive Directors is set out below. Full details of the remuneration packages are given in the Report on Remuneration:

Remuneration report



SalaryPurpose and link to strategy > To provide an appropriate salary level to support retention and recruitment of Executive

Directors and ensure that Executive Directors are appropriately rewarded in relation to their role and responsibilities

Operation > Base salaries are reviewed annually on 1 January with regard to average industry increases, each Executive Director’s role and responsibilities and salary adjustments across the Company

Opportunity > Salary increases will be awarded taking into account the outcome of the review and relative salary differentials across the executive team

> Salary increases will usually be in line with increases awarded to other employees but the Committee may make additional adjustments where there has been a change in role or responsibilities or to reflect a gap in market positioning

Performance metrics > Not applicable for base salaries

BenefitsPurpose and link to strategy > To provide a competitive and comprehensive range of benefits to assist in the attracting and retaining the

calibre of Executive Directors required for delivery of corporate and strategic objectives

Operation > The benefits package for Executive Directors includes private medical insurance, critical illness, income protection and life assurance cover. Benefits are administered internally and a review of providers and prices is conducted every two years to ensure that the level of rates and cover remains competitive

> Executive Directors also receive a travel allowance

Opportunity > The benefits package is set at a level that the Committee considers is appropriate for the Company’s size

> The value of benefits will vary each year according to the cost of provision

Performance metrics > Not applicable for benefits package

PensionPurpose and link to strategy > To provide an appropriate level of pension contribution for Executive Directors whilst minimising

the administrative burden for the Company

Operation > Contributions are made to a private or the Group personal pension plan. Since April 2017, contributions have been made up to the maximum Annual Allowance of £10,000 with the excess contribution paid by way of a pension cash allowance which is subject to deductions for tax and national insurance

Opportunity > An annual contribution equal to 15% of salary

Performance metrics > Not applicable for pension contributions

Annual bonusPurpose and link to strategy > To reward the achievement of annual and individual corporate targets

Operation > Objectives are set as early as possible in the financial year > The bonuses are paid in cash after the end of the financial year to which they relate

Opportunity > The annual bonus award is determined as a percentage of base salary based on performance against pre agreed objectives. When deciding on the level of bonus awards, the Committee will have regard to the extent to which achievement of the objectives has contributed to progress against the Company’s strategic drivers

> The bonus is non-contractual and is discretionary. Bonus payments will only exceed 50% of base salary in circumstances of exceptional strategic progress. Exceptional bonus payments may be in the form of shares and/or cash at the Committee’s discretion

> A one-off bonus of between 100% and 200% of salary will be payable at the point of project sanction on the Sea Lion Development with the exact quantum at the Committee’s discretion

Performance metrics > The targets for the Executive Directors comprise the corporate, strategic and financial objectives agreed by the Board. Individual objectives are also set for each Executive Director

> The Committee uses its judgement to decide the extent to which the objectives have been achieved and will have regard to overall Company performance when agreeing the bonus payments

> The Committee considers whether operations have been completed to acceptable HSE standards and considers whether there were any HSE incidents when considering the level of bonus payments



Long Term Incentive Plan (LTIP)Purpose and link to strategy > To support alignment with shareholders through the use of Total Shareholder Return

(‘TSR’) measured against a peer group as the performance target for awards under the LTIP

Operation > The LTIP was approved by shareholders in 2013 > The Committee makes annual awards of nil cost options which vest on a sliding scale

after the end of the performance period subject to the extent that the performance targets attached to the awards have been achieved

> Awards will usually be granted within a period of 42 days from the release of the annual financial results and will be calculated using the market value of the shares at the date of grant

> The LTIP performance period is currently set at three years and the commencement date of the performance period is at the discretion of the Committee

> Malus provisions exist so that the awards may be reduced or further conditions imposed in the case of financial misstatement, the misleading of shareholders or management/the Board regarding technical or financial performance, serious misconduct or conduct that results in a serious loss to the Company

> The Committee has discretion to amend the size and constitution of the peer group to ensure that it remains an appropriate comparator group and to reflect any corporate deals

> The Company has an employee benefit trust which can purchase shares in the market and/or subscribe for shares to satisfy the exercise/vesting of awards under the LTIP

Opportunity > The maximum annual award is 200% of salary

Performance metrics > Performance measurement will be TSR measured against a peer group based on an average price over a 90 day dealing period to be agreed by the Committee measured against the average 90 day dealing period up to the end of the performance period

> The percentage of awards that can vest is determined by the Committee at the time that the awards are made. Awards currently vest on a sliding scale from 35% up to 100% for performance between the median and highest performing stock. No awards will vest for performance below the median.

> The Committee has discretion to scale back the percentage of awards that will vest if it considers that this is appropriate having regard to underlying Company performance

Share Incentive Plan (SIP)Purpose and link to strategy > To encourage share ownership in Rockhopper

Operation > A tax-advantaged scheme under which employees (including Executive Directors) can elect to make contributions from gross salary for the purchase of Rockhopper shares which are then matched by the Company at a ratio agreed by the Committee at the beginning of each tax year. The Committee can also decide to make an award of ‘free’ shares up to legislative limits in any one tax year. The shares need to be held for a term of five years to obtain the full taxable benefit of the SIP. There is a qualification period of three months from joining before employees are eligible to participate

Opportunity > Since the implementation of the SIP the Committee has approved its operation up to the maximum permissible limits so that employees receive two ‘matching’ shares for each ‘partnership’ share purchased and an annual award of free shares at or below HMRC limits. Directors and senior employees have on occasion been precluded from participating where the Company has been in a close period at the time of the awards

Performance metrics > Not applicable for the SIP



Further details on the policyPerformance measurementAnnual bonus – the annual bonus is based on a range of corporate and individual objectives that the Board have agreed are key to progressing and delivering the Company’s strategy. These can be operational, strategic and financial. Performance targets are designed to be stretching but achievable having regard to the Company’s strategic priorities and external factors such as the activities of joint venture partners and the economic environment.

LTIP – the LTIP ensures alignment with shareholders being based on relative Total Shareholder Return measured against a peer group of other oil and gas companies comprising FTSE 250, larger AIM oil and gas and Falkland Island oil and gas companies. The Committee has determined that the minimum number of companies in the peer group will be nine. The size of the peer group has been increased in recent years to reduce the impact of corporate activity on the size and structure of the peer group. The Committee will also have regard to the underlying performance of the Company when confirming the vesting of LTIP awards to ensure that the impact of external factors is taken into consideration where appropriate.

Remuneration policy for other employees and consultationThe Company’s policy for all employees is to provide remuneration packages that reward them fairly for their contribution and role within the Company.

All employees are entitled to receive the full range of Company benefits but with different qualifying periods and levels of cover depending on seniority. All employees are eligible to receive an annual bonus based on performance against individual targets which are cascaded down from the corporate targets. The maximum level of bonus is currently 50% of salary although in exceptional circumstances a higher bonus award may be made.

All employees are eligible to participate in the SIP. The Committee has stated that the LTIP will be used for Executive Directors and senior staff. This ensures that an element of remuneration is deliverable through a scheme that aligns participants with shareholders.

The Company does not consult with employees on the effectiveness and appropriateness of the policy but, in considering individual salary increases, the Committee does have regard to salary increases across the Company.

Recruitment In the case of recruiting a new Executive Director, the Committee can use all the existing components of remuneration as set out in the policy table.

The salary of a new appointee will be determined by reference to the experience and skills of the individual, market data, internal relativities and the candidate’s current remuneration. New appointees may be entitled to receive the full range of Company benefits on joining and, if the Committee considers it appropriate, a relocation allowance and an annual contribution of up to 15% of base salary to the Group personal pension plan. The new appointee will also be eligible to participate in the Company’s SIP after a qualifying period.

In relation to any elements of variable pay, the Committee will take the following approach:

Component Approach Maximum annual opportunity

Annual Bonus > The annual bonus would operate as outlined in the Policy for existing Executive Directors. The relevant maximum will be pro-rated to reflect the period of employment over the year. Consideration will be given to the appropriate performance targets at the time of joining

50% of base salary in respect of the current financial year except in circumstances of exceptional strategic progress

LTIP > The LTIP would operate as outlined in the policy for existing Directors. An award may be granted on joining subject to the Company being in an open dealing period. The Committee would retain discretion to decide on the scale, performance period and performance targets attaching to any award.

200% of base salary in any financial year



In the case of an external hire, the Committee may deem it appropriate to ‘buy-out’ incentive or benefit arrangements which the new appointee would have to forfeit on leaving their previous employer. The Committee would consider the potential value of the arrangement being forfeited and wherever possible would use the existing components of the Company’s remuneration structure to compensate the incoming director. The value of any buy-out arrangements would be capped at no higher, on recruitment, than the awards or benefits which the individual forfeited on leaving their previous employer. In the case of an internal hire, the new appointee may retain awards made to him/her under arrangements entered into prior to appointment to the Board even if such awards are not within the Directors’ Remuneration Policy as outlined in the policy table.

Service contracts, exit payments and change of control provisions The Executive Directors have rolling term service agreements with the Company. Details of the Directors’ service contracts and appointment dates are as follows:

Executive Directors Appointment date Original contract Revised contract

S J Moody 21 February 2005 8 August 2005 8 March 2011S MacDonald 10 March 2014 27 March 2014 —

The Directors’ service contracts are available to view at the Company’s registered office and prior to each Annual General Meeting at the venue for the meeting.

The notice period for the Executive Directors is 12 months’ notice in writing by either party. The Company has the right to make a payment in lieu of notice of 12 months’ salary plus the fair value of any benefits. There is no entitlement to payment for any accrued holiday where a payment in lieu of notice is made. The Committee will consider termination payments on a case-by-case basis. It will consider the terms of the Director’s contract and the circumstances of the termination and might consider making an ex gratia payment where the circumstances and/or a Director’s contribution to the Company justifies this. If an ex gratia payment is to be made, the Committee will ensure that it is satisfied that it is in the best interests of the Company to make such a payment and that there is no “reward for failure”.

The Committee also has discretion to settle any other amounts which it considers are reasonably due to the Director such as where the parties agree to enter into a settlement agreement and the individual is required to seek independent legal advice. The Committee can approve new contractual arrangements with a departing Director covering matters such as confidentiality or restrictive covenants and/or consultancy arrangements where it believes this is in the best interests of the Company.

Treatment of incentives for leaversIn relation to annual bonuses, a bonus payment will not usually be made if the Director is under notice at the bonus payment date or has already left. In the event of a change of control, the Committee retains the right to declare a bonus in respect of the part of the year worked prior to the change of control becoming effective.

In relation to awards granted under the LTIP, awards will generally lapse on the date of cessation of employment except in certain ‘good leaver’ circumstances which are generally defined as retirement, ill-health, disability, death, redundancy, transfer or sale of the employing company or any other circumstances at the discretion of the Committee. In these circumstances, any unvested award will usually continue and vest on the normal vesting date. The Committee will decide the extent to which the unvested award will vest taking into account (i) the period of time that has elapsed since the start of the performance period and (ii) the extent to which any performance target is satisfied at the date the director ceases to be employed by the Company. Final treatment is subject to the Committee’s discretion.

In relation to share appreciation rights (SARs) granted under the Company’s Employee Share Option Scheme, SARs will lapse on the date of cessation of employment except in certain ‘good leaver’ circumstances which are generally defined as retirement, ill-health, disability, death, redundancy, transfer or sale of the employing company or any other circumstances at the discretion of the Committee. In the case of death, SARs shall be exercisable immediately for a period of one year from the date of death. In other good leaver circumstances, SARs will be exercisable for a period of six months from the date of cessation. Where the Committee exercises its discretion to allow a leaver to be a good leaver, the Committee may also determine both the proportion of the SAR award that may be exercised and the period during which the SARs can be exercised.

In the event of termination of employment or a change of control, shares held under the SIP will be dealt with in accordance with the SIP rules. The Committee does not have any discretion in relation to the operation of the SIP.



Non-Executive Director Remuneration PolicyThe Company’s Articles of Association provide that the Board can determine the level of fees to be paid to the Non-Executive Directors within limits set by the shareholders. This is currently set at an aggregate of £500,000 per annum. The policy for the Chairman and Non-Executive Directors is as follows:

Fees

Purpose and link to strategy > To provide a competitive level of fee which will attract and retain high calibre Directors with the range of skills and experience required to support the Executive Directors and assist the Company in delivering its objectives

Operation > The fees for the Chairman and Non-Executive Directors are determined by the Board as a whole with Directors absenting from discussions regarding their own remuneration

> The Board has regard to level of fees paid to the Non-Executive Directors of other similar sized companies and the time commitment and responsibilities of the role

> Neither the Chairman nor the Non-Executive Directors participate in any of the Company’s share schemes

Opportunity > The current annual fees are:

> Chairman: £115,000

> Non-Executive Director basic fee: £40,000

> Committee Chairmanship: £10,000

> Senior Independent Director: £2,500

> The fee levels will be reviewed on a periodic basis with reference to the time commitment of the role and fee levels in comparative companies

No benefits or other remuneration are provided

Performance metrics > Not applicable to Non-Executive Directors

RecruitmentThe Committee will follow the Non-Executive Director Remuneration Policy as set out above in relation to the appointment of a new Non-Executive Director.

Terms of appointment The Non-Executive Directors do not have service contracts but are appointed for terms of three years. The appointment can be terminated at any time by either party giving one month’s notice to the other. Details of appointment are set out below:

Director Appointment date Original engagement letter Revised engagement letter

David McManus 30 September 2010 30 November 2010 29 October 2013 8 July 2016Keith Lough 14 January 2014 14 January 2014 1 February 2017John Summers 1 February 2014 3 February 2014 1 February 2017Tim Bushell 18 January 2016 18 January 2016 18 January 2019Alison Baker 18 September 2018 18 September 2018 —

Directors are subject to annual re-election by shareholders at the Annual General Meeting and each Director is subject to election by shareholders at the first Annual General Meeting following their appointment. The Non-Executive Directors’ letters of appointment are available to view at the Company’s registered office and prior to each Annual General Meeting at the venue for the meeting.



Report on RemunerationRemuneration Committee membership and meetingsAs at 31 December 2018, the Committee comprised the Committee Chairman and three independent Non-Executive Directors. The Committee met three times during the financial period and the 2018 LTIP awards were dealt with by way of written resolutions of the Committee.

The members of the Committee during the year and as at the year end and their attendance are summarised below:

Committee member Meeting attendance

TP Bushell (Committee Chairman) 3/3KG Lough 3/3JE Martin (resigned 18 May 2018) 3/3 AJ Summers 3/3AC Baker (appointed 18 September 2018) 0*

* There were no committee meetings held after Alison Baker’s appointment

During the financial year, the Committee’s main areas of activity included:

> Confirming the staff salary adjustments for 2018 and bonus awards for the year ended 31 December 2017. > Setting the targets for the bonus scheme for the forthcoming financial year.> Reviewing the Company’s remuneration policy. > Approving the Directors’ Remuneration Report for the year ended 31 December 2017.> Approving the 2018 LTIP awards and reviewing the constitution of the peer group.> Approving the annual implementation of the SIP.> Reviewing the administration and governance of the Group personal pension plan.> Approving the introduction of a staff appraisal system.

The Company Secretary acted as secretary to the Committee and provided advice in relation to the operation and implementation of incentive schemes and remuneration packages. The Chairman of the Board attended Committee meetings by invitation.

No individual is involved in determining his or her own remuneration.

External adviceThe Company Secretary is the principal source of advice on employment matters, remuneration policy and practice and share scheme administration for the Committee. However, from time to time, the Committee obtains external legal advice from Osborne Clarke in relation to employment matters and the operation of the share schemes. The Committee considers that the advice it received during the financial period was objective and independent.

Total RemunerationThe table below reports a single figure for total remuneration for each Executive Director:

Long-term Pension/pension Salary Taxable benefits Annual bonus Incentives cash allowance SIP awards Total £’000 £’000 £’000 £’000 £’000 £’000 £’000

Year Year Year Year Year Year Year Year Year Year Year Year Year Year ended ended ended ended ended ended ended ended ended ended ended ended ended ended 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 31 Dec 2018 2017 2018 2017 2018 2017 2018 2017 2018 2017(ii) 2018 2017 2018 2017

S J Moody 373.0 362.1 11.2 10.9 93.0 108.6 — — 55.9 36.5 6.6 6.6 539.7 524.7S MacDonald 305.9 297.0 9.7 9.6 93.0 89.1 — — 45.9 29.7 6.6 6.6 461.1 432.0FM MacAulay (i) — 201.3 — 6.2 — — — — — 12.2 — 4.8 — 224.5

(i) F MacAulay left the Company on 4 July 2017(ii) Represents pension contributions/pension cash allowance paid in 2017 for the period from 1 April 2017 to 31 December 2017



The table below reports a single figure for total remuneration for each Non-Executive Director:

Base fee Additional fees Total £’000 £’000 £’000

Year ended Year ended Year ended Year ended Year ended Year ended 31 December 31 December 31 December 31 December 31 December 31 December 2018 2017 2018 2017 2018 2017

D McManus 115.0 115.0 — — 115.0 115.0K G Lough 40.0 40.0 12.5 12.5 52.5 52.5A J Summers 40.0 40.0 — — 40.0 40.0T P Bushell 40.0 40.0 10.0 10.0 50.0 50.0J E Martin (resigned 18 May 2018) 20.0 40.0 — — 20.0 40.0A C Baker (appointed 18 September 2018) 11.4 — — — 11.4 —

J E Martin resigned from the Board on 18 May 2018.

A C Baker was appointed as a Director on 18 September 2018.

No fees were paid to Non-Executive Directors for membership of a committee or for attending committee meetings. Additional fees were payable of £2,500 (2017: £2,500) for acting as Senior Independent Director and £10,000 as Chairman of the Audit and Risk Committee and Remuneration Committee. The Chairman of the Company does not receive any additional fees for chairing the Nomination Committee.

Additional information in respect of single figure table of remuneration for the year ended 31 December 2018Annual bonusIn respect of the financial period, the Committee agreed that the Executive Director annual bonus opportunity would be up to 50% of base salary. The following objectives and outcomes were agreed for the 2018 financial year:

• Preservation of the Company’s cash position/strengthening the balance sheet The year end target cash position had been exceeded and there had been a substantial reduction in the Group’s EGPC receivables

position. A significant number of new venture opportunities had been reviewed in 2018 but none met the Company’s investment criteria. The Committee agreed that this objective had been partially achieved.

• Making a commercial discovery in Egypt Two commercial discoveries had been made in Egypt during the 2018 drilling campaign. The Committee agreed that this

objective had been fully achieved.

The Committee recognised that the executive directors had performed well against the agreed objectives but, in the interests of alignment with shareholders, the Committee exercised its discretion to award lower bonus payments for 2018 than those calculated from the percentage achievement of the targets. The Committee therefore agreed that the following bonuses should be paid to each of the Executive Directors which reflected the relative contributions to achievement of the targets.

Bonuses were paid in cash and were as follows:Director Final Bonus as % of salary Cash £

SJ Moody 25% 93,000S MacDonald 30% 93,000



LTIP awards granted during the financial yearThe table below summarises the LTIP awards granted to Executive Directors during the financial year in accordance with the policy. The percentage of awards which will vest will be dependent on total shareholder return (‘TSR’) measured against a peer group of 15 companies over a three year period.

Number of options subject to TSR performance Share price condition Maximum at date of Exercise — see 1 below number of shares Face value of Director Date of grant grant price that may vest maximum award*

SJ Moody 23 April 2018 £0.255 — 2,100,000 2,100,000 £535,500S MacDonald 23 April 2018 £0.255 — 1,900,000 1,900,000 £484,500

* The face value of the awards is calculated using the share price at the date of grant. The actual value of the awards to participants will be dependent on the percentage of the award that vests and the share price at the date of exercise.

The key features of the 2018 LTIP awards are as follows:

> Awards are in the form of nil cost options.

> Performance will be measured over the three year period to 31 March 2021.

> Performance measurement is based on the average price over the 90 day dealing period to 31 March 2018 measured against the 90 day dealing period up to 31 March 2021.

> Performance is based on Total Shareholder Return (‘TSR’) measured against an original peer group of 15 other oil and gas companies comprising both FTSE 250, larger AIM oil and gas companies and Falkland Islands focussed companies being EnQuest PLC, Amerisur Resources plc, Providence Resources Plc, Faroe Petroleum plc, BowLeven plc, Borders & Southern Petroleum plc, Premier Oil plc, Hurricane Energy plc, Sound Energy plc, The Parkmead Group plc, IGas Energy plc, Gulf Keystone Petroleum Limited, Chariot Oil & Gas Limited, Ophir Energy plc and SDX Energy Inc. The Committee has discretion to amend the size and constitution of the peer group to ensure that it remains appropriate and to reflect corporate changes.

> Awards will vest on a sliding scale from 35% up to a maximum of 100% for performance in the top two quartiles with no awards vesting for performance in the bottom two quartiles.

Implementation of Executive Director Remuneration Policy for 2019Base salariesAs part of the annual remuneration review, the Committee considered general economic conditions in the UK and had regard to current industry market practice in relation to salary adjustments. The Executive Directors’ base salaries were increased by 2% with effect from 1 January 2019.

Annual bonusFor 2019, the Executive Director annual bonus will be determined as a percentage of base salary based on performance against pre agreed corporate and personal objectives. When deciding on the level of bonus awards, the Committee will have regard to the extent to which achievement of the objectives has contributed to progress against the Company’s strategic drivers. Bonus payments will only exceed 50% of base salary in circumstances of exceptional strategic progress. The Committee has the discretion to decide the form of any exceptional bonus payments which may be in shares and/or cash.

The Committee has agreed the following objectives for the financial year ending 31 December 2019:

> Preservation of the Company’s cash position and strengthening of the Company’s balance sheet

> Portfolio management including mergers, asset acquisitions and disposals to strengthen the Company’s balance sheet

The Committee previously agreed to remove progress towards the Final Investment Decision on the Sea Lion Development from the Executive Directors’ bonus targets. A one off special bonus of between 100% and 200% of salary will be payable at project sanction with the exact quantum of this bonus at the Committee’s discretion.



Long Term Incentive PlanThe Committee intends to grant LTIP awards in 2019 in line with the Policy. The Committee will consider the appropriate performance period and quantum at the time of the awards. It is intended that the performance condition will remain as TSR measured against a peer group.

Benefits, pension contributions and share plansThe Executive Directors will receive the range of Company benefits, pension contribution and cash allowance and participation in the SIP in line with the policy.

Implementation of Non-Executive Director remuneration policy for 2019Non-Executive Director fees (excluding the Chairman) were last increased in 2014 and no further review is scheduled. The fees are set out in the table below:

Role Type of fee

Chairman Total fee £115,000Other non-executive directors Basic fee £40,000 Chairman of Remuneration and Audit & Risk Committees £10,000 Senior Independent Director £2,500

Statement of directors’ shareholdings The table below summarises the interests in shares (including those held in the SIP) of the directors in office at the year end:

At 31 December 2018 At 31 December 2017 Ordinary 1p shares Ordinary 1p shares

Samuel Moody 2,363,640 2,333,749Stewart MacDonald 285,310 255,419David McManus 498,952 498,952Tim Bushell 103,606 103,606John Summers 244,100 244,100Keith Lough — —Alison Baker — —

The Committee has agreed that the Executive Directors should be encouraged to build up a stake of Rockhopper shares equivalent to annual base salary in the case of S MacDonald and two times annual base salary in the case of S J Moody over a five year period. It is intended that this should be achieved through the retention of any vested LTIP awards and Share Appreciation Rights awarded under the Employee Share Option Scheme.

Outstanding awards under the LTIP and Employee Share Option Scheme (a) LTIP

(i) Unvested LTIP Awards Awards Lapsed/ Awards Market price Earliest Date of held at relinquished held at at date Performance vesting Director grant 31 Dec 2017 Granted during Year Vested 31 Dec 2018 of award period date

S J Moody 13.04.15 855,354 — 855,354 — — — — — 22.04.16 1,738,080 — — — 1,738,080 £0.3125 01.04.16-31.03.19 31.03.19 16.06.17 1,900,000 — — — 1,900,000 £0.2025 01.06.17-31.05.20 16.06.20 23.04.18 — 2,100,000 — — 2,100,000 £0.2550 01.04.18-31.03.21 23.04.21S MacDonald 13.04.15 701,575 — 701,575 — — — — — 22.04.16 1,425,600 — — — 1,425,600 £0.3125 01.04.16-31.03.19 31.03.19 16.06.17 1,800,000 — — — 1,800,000 £0.2025 01.06.17-31.05.20 16.06.20 23.04.18 — 1,900,000 — — 1,900,000 £0.2550 01.04.18-31.03.21 23.04.21



ii) Vested LTIP Awards Vested Vested Awards Exercised Awards Date of held at during the held at Director grant 31 Dec 2017 year 31 Dec 2018

SJ Moody 08.10.13 177,802* — 177,802*S MacDonald 10.03.14 70,391* — 70,391*

* Exercise of the vested 2013 LTIP awards is subject to Rockhopper’s share price exceeding £1.80 averaged over any 90 dealing period ending no later than 31 March 2023.

(b) Share optionsAs at 31 December 2017 and 31 December 2018 there were no share options held by individuals who were directors during the year ended 31 December 2018.

(c) Share appreciation rightsThe share appreciation rights outstanding as at 31 December 2018 and held by individuals who were Directors during the year ended 31 December 2018 are:

Awards held at Exercised during Lapsed during Awards held at Exercise price Director Date of grant 31 December 2017 the year the year 31 December 2018 Pence

S J Moody 11.01.11 76,056 — — 76,056 372.75 17.01.12 77,777 — — 77,777 303.75 30.01.13 91,077 — — 91,077 159.00 244,910 — — 244,910

Share price movements during year ended 31 December 2018 The mid-market closing price of the Company’s shares as at 31 December 2018 was 21.10 pence (31 December 2017: 21.25 pence). The range of the trading price of the Company’s shares during the year was between 20.25 pence and 44.95 pence.

Executive director external appointmentsS J Moody is a Non-Executive Director of Greenland Gas & Oil Limited for which he receives a fee. S MacDonald does not have any external directorships for which he is paid a fee.

By order of the Board

T P Bushell Chairman of the Remuneration Committee

1 April 2019



Statutory information

Principal activityThe principal activity of the Group is the exploration and exploitation of its oil and gas acreage. Group strategy is to explore, appraise, develop and manage production from its acreage both safely and responsibly.

Results and dividendsThe trading results for the year, and the Group’s financial position at the end of the period are shown in the attached financial statements. The Directors have not recommended a dividend for the year (year ended 31 December 2017: £nil).

Key performance indicators “KPIs”See page 17 for more details.

Substantial shareholdersAt 31 March 2019 the Company had been notified of the following interests of three percent or more of the Company’s voting rights.

Number of % of issued Shareholder/Fund manager shares share capital

Majedie Asset Management 34,723,166 7.59Hosking Partners 17,781,329 3.89Aedos Advisers 17,545,290 3.84

Directors The present members of the Board are as listed in the Board of Directors section. The interests of the Directors in office at the year end in the share capital of the Company are shown in the Directors’ Remuneration Report along with details of their service contracts and terms of appointment.

Post balance sheet eventsThere are no important events affecting the Group since the financial year end.

Principal risks and uncertaintiesInformation relating to the principal risks and uncertainties facing the Group is set out in the Strategic Report and note 30.

Related party transactionsRelated party transactions are disclosed in note 29.

Financial instrumentsFor the period under review the Group held no financial instruments, outside of cash and receivables. Financial risk management policies are disclosed in note 30.

Political and charitable contributionsThe Group made no charitable donations (year ended 31 December 2017: £nil) and no political donations (year ended 31 December 2017: £nil) during the year.

Creditor payment policyThe Group does not follow any specific code or standard on payment practice. However, it is the policy of the Group to ensure that all of its suppliers of goods and services are paid promptly and in accordance with contractual and legal obligations. Average creditor days for the year were 35 days (year ended 31 December 2017: 43 days), on the basis of accounts payable as a percentage of amounts invoiced during the year.

Qualifying indemnity provisionsThe Company has entered into separate indemnity deeds with each director containing qualifying indemnity provisions, as defined at section 236 of the Companies Act 2006, under which the Company has agreed to indemnify them in respect of certain liabilities which may attach to them as a director or as a former director of the Company. At the date of this Directors’ Report indemnity deeds containing qualifying indemnity provisions are in force for all of the Company’s Directors. The Company has also issued an indemnity to Directors and the Company Secretary in respect of any personal liability to Falkland Islands tax by the Company or its subsidiaries.

Directors’ and Officers’ insuranceThe Group maintained directors’ and officers’ liability insurance cover throughout the period. The Directors are also able to obtain independent legal advice at the expense of the Group, as necessary, in their capacity as Directors.

EmployeesThe Group had 19 employees at the year end, two of whom are Executive Directors. The Group seeks to employ people on the basis of merit and ability to perform the required roles. The Group does not discriminate on any grounds including race, gender, religion, age, nationality or sexual orientation.



EnvironmentThe Group’s operations are, and will be, subject to environmental regulation (with regular environmental impact assessments and evaluation of operations required before any permits are granted to the Group) in the jurisdiction in which it operates. Although the Group intends to be in compliance with all applicable environmental laws and regulations, there are certain risks inherent to its activities, such as accidental spills, leakages or other circumstances, that could subject the Group to extensive liability. Further, the Group may fail to obtain the required approval from the relevant authorities necessary for it to undertake activities which are likely to impact the environment. The Group is unable to predict the effect of additional environmental laws and regulations which may be adopted in the future, including whether any such laws or regulations would materially increase the Group’s cost of doing business or affect its operations in any area.

Statement of Directors’ responsibilities in respect of the strategic report, the Directors’ report and the financial statements The Directors are responsible for preparing the Strategic Report, the Directors’ Report and the Group and Parent Company financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare Group and Parent Company financial statements for each financial year. As required by the AIM Rules of the London Stock Exchange they are required to prepare the Group financial statements in accordance with IFRSs as adopted by the EU and applicable law and have elected to prepare the Parent Company financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 101 Reduced Disclosure Framework.

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Parent Company and of their profit or loss for that period. In preparing each of the Group and Parent Company financial statements, the Directors are required to:

> select suitable accounting policies and then apply them consistently;

> make judgements and estimates that are reasonable and prudent;

> for the Group financial statements, state whether they have been prepared in accordance with IFRSs as adopted by the EU;

> for the Parent Company financial statements, state whether applicable UK Accounting Standards have been followed, subject to any material departures disclosed and explained in the financial statements;

> assess the Group and Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and

> use the going concern basis of accounting unless they either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so.

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Parent Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Parent Company and enable them to ensure that its financial statements comply with the Companies Act 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also responsible for preparing a Strategic Report and a Directors’ Report that complies with that law and those regulations.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Jan Davies Company Secretary

1 April 2019



Independent auditor’s report to the members of Rockhopper Exploration plc

1. Our opinion is unmodified We have audited the financial statements of Rockhopper Exploration plc (“the Company”) for the year ended 31 December 2018 which comprise the Group Income statement, the Group Statement of Comprehensive Income, the Group and Parent Company Balance Sheet, the Group and Parent Company Cash Flow Statements, the Group and Parent Company Statements of Changes in Equity, and the related notes, including the accounting policies in note 1.

In our opinion: > the financial statements give a true and fair

view of the state of the Group’s and of the parent Company’s affairs as at 31 December 2018 and of the Group’s loss for the year then ended;

> the group financial statements have been properly prepared in accordance with International Financial Reporting Standards as adopted by the European Union (IFRSs as adopted by the EU);

> the parent Company financial statements have been properly prepared in accordance with UK accounting standards, including FRS 101 Reduced Disclosure Framework; and

> the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Group in accordance with, UK ethical requirements including the FRC Ethical Standard as applied to listed entities. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

2. Key audit matters: our assessment of risks of material misstatement

Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. In arriving at our audit opinion above, the key audit matters were as follows (unchanged from 2017):

The risk Our response

Recoverability of exploration and evalution assets/Recoverability of Parent company’s investment in subsidiaries and receivables due from group companiesExploration and evaluation assets: $447.0m (2017: $432.1m)

Refer to page 60 (accounting policy) and page 72 (financial disclosures)

Investment in subsidiaries: $93.6m (2017: $93.6m)

Loans due from group companies: $438.7m (2017: $412.2m)

Refer to page 82 (accounting policy) and pages 84 and 85 (financial disclosures)

Forecast-based valuationUncertainty related to development prospects of the fields in the Falkland Islands area could have a significant impact on the recoverable amount of Group’s exploration and evaluation assets. Forecasting the recoverable amount of the group’s CGUs is a highly subjective area due to the inherent uncertainty involved in forecasting and discounting future cash flows, specifically around oil and gas prices, reserve estimates and future cost estimates. Moreover, certain licenses in this area expire in 2020. The conversion of these to production licenses is subject to the ability of the Company to secure financing for further development and successful negotiations with local government.

Recoverability of Parent company’s investment in subsidiaries and receivables due from group companies depend solely on the development prospects of the fields in the Falkland Islands area.

Our procedures included:> Impairment triggers: We assessed the directors’

judgments in considering if any impairment indicators were present by considering whether the appropriate business developments during the year were incorporated in that analysis;

> Assessing license extension prospects: We assessed whether it is likely that conversion will be granted for licenses in the Falkland Islands area. We inquired about the stages of negotiations with UK Export Finance and other creditors to determine expected timeline of securing financing necessary for development of the oilfields in the area and read available correspondence with these parties.



3. The impact of uncertainties due to the UK exiting the European Union on our audit

Uncertainties related to the effects of Brexit are relevant to understanding our audit of the financial statements. All audits assess and challenge the reasonableness of estimates made by the directors and related disclosures and the appropriateness of the going concern basis of preparation of the financial statements. All of these depend on assessments of the future economic environment and the group’s future prospects and performance. Brexit is one of the most significant economic events for the UK, and at the date of this report its effects are subject to unprecedented levels of uncertainty of outcomes, with the full range of possible effects unknown. We applied a standardised firm-wide approach in response to that uncertainty when assessing the group’s future prospects and performance. However, no audit should be expected to predict the unknowable factors or all possible future implications for a company and this is particularly the case in relation to Brexit.

4. Our application of materiality and an overview of the scope of our audit

Materiality for the group financial statements as a whole was set at $5.1m (2017: $5.3m), determined with reference to a benchmark of total assets, of which it represents 1% (2017: 1%).

Materiality for the parent company financial statements as a whole was set at $5.1m (2017: $5.3m), determined with reference to a benchmark of net assets and chosen not to exceed materiality for the group financial statements as a whole. It represents 1% (2017: 1%) of the stated benchmark.

We agreed to report to the Audit Committee any corrected or uncorrected identified misstatements exceeding $250k (2017: $275k), in addition to other identified misstatements that warranted reporting on qualitative grounds.

For both the current and prior year, the Group audit team performed the audit of the Group (including the Parent Company financial information) as if it was a single aggregated set of financial information.

5. We have nothing to report on going concern The Directors have prepared the financial statements on the going concern basis as they do not intend to liquidate the Company or the Group or to cease their operations, and as they have concluded that the Company’s and the Group’s financial position means that this is realistic. They have also concluded that there are no material uncertainties that could have cast significant doubt over their ability to continue as a going concern for at least a year from the date of approval of the financial statements (“the going concern period”).

Our responsibility is to conclude on the appropriateness of the Directors’ conclusions and, had there been a material uncertainty related to going concern, to make reference to that in this audit report. However, as we cannot predict all future events or conditions and as subsequent events may result in outcomes that are inconsistent with judgements that were reasonable at the time they were made, the absence of reference to a material uncertainty in this auditor’s report is not a guarantee that the group or the company will continue in operation. In our evaluation of the Directors’ conclusions, we considered the inherent risks to the Group’s and Company’s business model, including the impact of Brexit, and analysed how those risks might affect the Group’s and Company’s financial resources or ability to continue operations over the going concern period. We evaluated those risks and concluded that they were not significant enough to require us to perform additional audit procedures. Based on this work, we are required to report to you if we have concluded that the use of the going concern basis of accounting is inappropriate or there is an undisclosed material uncertainty that may cast significant doubt over the use of that basis for a period of at least a year from the date of approval of the financial statements. We have nothing to report in these respects, and we did not identify going concern as a key audit matter.

6. We have nothing to report on the other information in the Annual Report

The directors are responsible for the other information presented in the Annual Report together with the financial statements. Our opinion on the financial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except as explicitly stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work we have not identified material misstatements in the other information.

Strategic report and directors’ report Based solely on our work on the other information: > we have not identified material misstatements in the strategic

report and the directors’ report; > in our opinion the information given in those reports for the

financial year is consistent with the financial statements; and > in our opinion those reports have been prepared in accordance

with the Companies Act 2006.



7. We have nothing to report on the other matters on which we are required to report by exception Under the Companies Act 2006, we are required to report to you if, in our opinion: > adequate accounting records have not been kept by the parent

Company, or returns adequate for our audit have not been received from branches not visited by us; or

> the parent Company financial statements are not in agreement with the accounting records and returns; or

> certain disclosures of directors’ remuneration specified by law are not made; or

> we have not received all the information and explanations we require for our audit.

We have nothing to report in these respects.

8. Respective responsibilities Directors’ responsibilities As explained more fully in their statement set out on page 51, the directors are responsible for: the preparation of the financial statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic alternative but to do so.

Auditor’s responsibilities Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

9. The purpose of our audit work and to whom we owe our responsibilities This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Lynton Richmond (Senior Statutory Auditor)

For and on behalf of KPMG LLP, Statutory AuditorChartered accountants15 Canada SquareLondon E14 5GL

1 April 2019

Year ended Year ended 31 December 31 December 2018 2017 Notes $’000 $’000

Revenue 10,580 10,401Other cost of sales (4,563) (4,100)

Depreciation and impairment of oil and gas assets (3,968) (5,473)

Total cost of sales 4 (8,531) (9,573)

Gross profit 2,049 828

Exploration and evaluation expenses 5 (5,014) (3,422)Costs in relation to acquisition and group restructuring (58) —

Recurring administrative costs (5,328) (5,282)

Total administrative expenses 6 (5,386) (5,282)

Charge for share based payments 9 (1,478) (864)

Other income 943 —

Foreign exchange movement 10 1,208 (966)

Results from operating activities and other income (7,678) (9,706)

Finance income 11 825 783

Finance expense 11 (253) (39)

Loss before tax (7,106) (8,962)

Tax 12 (25) 2,823

Loss for the year attributable to the equity shareholders of the parent company (7,131) (6,139)

Loss per share: cents

Basic 13 (1.57) (1.34)

Diluted 13 (1.57) (1.34)

All operating income and operating gains and losses relate to continuing activities.

Group statement of comprehensive incomefor the year ended 31 December 2018

Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000

Loss for the year (7,131) (6,139)

Exchange differences on translation of foreign operations 371 (1,151)

Total comprehensive loss for the year (6,760) (7,290)

Group income statementfor the year ended 31 December 2018

Financial StatementsRockhopper Exploration plc


31 December 31 December 2018 2017 Notes $’000 $’000

Non current assets

Exploration and evaluation assets 14 447,035 432,147

Property, plant and equipment 15 11,836 11,585

Goodwill 16 10,308 10,789

Current assets

Inventories 1,779 1,621

Other receivables 17 9,510 16,840

Restricted cash 18 568 540

Term deposits 19 30,000 30,000

Cash and cash equivalents 10,426 20,729

Assets held for sale 20 — 3,814

Total assets 521,462 528,065

Current liabilities

Other payables 21 15,148 12,772

Non-current liabilities

Tax payable 22 37,860 40,057

Provisions 23 13,888 5,986

Deferred tax liability 24 39,223 39,202

Liabilities directly associated with assets held for sale 20 — 9,450

Total liabilities 106,119 107,467

Equity

Share capital 25 7,205 7,200

Share premium 26 3,422 3,282

Share based remuneration 26 5,103 5,609

Own shares held in trust 26 (3,369) (3,383)

Merger reserve 26 74,332 74,332

Foreign currency translation reserve 26 (9,748) (10,119)

Special reserve 26 456,680 460,077

Retained losses 26 (118,282) (116,400)

Attributable to the equity shareholders of the company 415,343 420,598

Total liabilities and equity 521,462 528,065

These financial statements were approved by the directors and authorised for issue on 1 April 2019 and are signed on their behalf by:


Group balance sheet as at 31 December 2018

Financial Statements Rockhopper Exploration plc


Foreign currency Share Share Share based Shares held Merger translation Special Retained Total capital premium remuneration in trust reserve reserve reserve losses equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 31 December 2016 7,194 3,149 6,251 (3,407) 74,332 (8,968) 462,549 (114,106) 426,994

Total comprehensive loss for the year — — — — — (1,151) — (6,139) (7,290)

Share based payments (see note 9) — — 864 — — — — — 864

Share issues in relation to SIP 6 133 — (109) — — — — 30

Other transfers — — (1,506) 133 — — (2,472) 3,845 —


Total comprehensive loss for the year — — — — — 371 — (7,131) (6,760)

Share based payments (see note 9) — — 1,478 — — — — — 1,478

Share issues in relation to SIP 5 140 — (118) — — — — 27

Other transfers — — (1,984) 132 — — (3,397) 5,249 —


Group statement of changes in equityfor the year ended 31 December 2018



Year ended Year ended 31 December 31 December 2018 2017 Notes $’000 $’000

Cash flows from operating activitiesNet loss before tax (7,106) (8,962)Adjustments to reconcile net losses to cash:

Depreciation 15 4,111 5,687Share based payment charge 9 1,478 864Exploration impairment expenses 14 3,884 2,321Finance expense 253 40Finance income (825) (783)Foreign exchange 10 (2,256) 3,331

Operating cash flows before movements in working capital (461) 2,498Changes in:

Inventories (23) —Other receivables 7,029 (964)Payables (103) 110Movement on other provisions (1,012) (14)

Cash from/(utilised by) operating activities 5,430 1,630

Cash flows from investing activitiesCapitalised expenditure on exploration and evaluation assets (13,940) (25,366)Purchase of property, plant and equipment (1,844) (1,451)Acquisition of Beach Egypt (658) (6,266)Interest 750 566

Investing cash flows before movements in capital balances (15,692) (32,517)Changes in:

Restricted cash (28) (45)Cash flow from investing activities (15,720) (32,562)

Cash flows from financing activitiesShare incentive plan 27 30Finance expense (9) (43)

Cash flow from financing activities 18 (13)

Currency translation differences relating to cash and cash equivalents (31) 655Net cash flow (10,272) (30,945)Cash and cash equivalents brought forward 20,729 51,019

Cash and cash equivalents carried forward 10,426 20,729

Group cash flow statementfor the year ended 31 December 2018



1. Accounting policies1.1 Group and its operations

Rockhopper Exploration plc, the ‘Company’, a public limited company quoted on AIM, incorporated and domiciled in the United Kingdom (‘UK’), together with its subsidiaries, collectively ‘the ‘Group’ holds certain exploration licences for the exploration and exploitation of oil and gas in the Falkland Islands. In 2014, it diversified its portfolio into the Greater Mediterranean through the acquisition of an exploration and production company with operations principally based in Italy and during 2016 augmented this through the acquisition of exploration and production assets in Egypt. The registered office of the Company is 4th Floor, 5 Welbeck Street, London, W1G 9YQ.

1.2 Statement of complianceThe consolidated financial statements are prepared in compliance with International Financial Reporting Standards (IFRS) as adopted by the European Union and applied in accordance with UK company law. The consolidated financial statements were approved for issue by the board of directors on 1 April 2019 and are subject to approval at the Annual General Meeting of shareholders on 15 May 2019.

1.3 Basis of preparationThe results upon which these financial statements have been based were prepared using the accounting policies set out below. These policies have been consistently applied unless otherwise stated.

These consolidated financial statements have been prepared under the historical cost convention except, as set out in the accounting policies below, where certain items are included at fair value.

Items included in the results of each of the Group’s entities are measured in the currency of the primary economic environment in which that entity operates (the “functional currency”).

All values are rounded to the nearest thousand dollars ($’000) or thousand pounds (£’000), except when otherwise indicated.

1.4 Change in accounting policy Changes in accounting standards

In the current year new and revised standards, amendments and interpretations were effective and are applicable to the consolidated financial statements of the Group but did not affect amounts reported in these financial statements.

At the date of authorisation of this report the following standards and interpretations, which have not been applied in this report, were in issue but not yet effective.

– IFRS16 Leases (effective date for annual periods beginning on or after 1 January 2019);

Management does not believe that the application of this standard will have a material impact on the financial statements.

1.5 Going concernAt 31 December 2018, the Group had available cash and term deposits of $40 million. In addition the first phase of the Group’s main development, Sea Lion, is fully funded from sanction through a combination of Development Carries and a loan facility from the operator.

The Group monitors its cash position, cash forecasts and liquidity on a regular basis and takes a conservative approach to cash management, with surplus cash held on term deposits with a number of major financial institutions.



Notes to the group financial statementsfor the year ended 31December 2018



1. Accounting policies (continued)1.5 Going concern (continued)

Under the base case forecast and the downside scenarios run, the Group will have sufficient financial headroom to meet forecast cash requirements for at least the 12 months from the date of approval of the 2018 financial statements. However, beyond the 12 month going concern assessment depending on the timing of sanction for the Sea Lion development, in the absence of any mitigating actions, the Group may have insufficient funds to meet its forecast cash requirements.

Potential mitigating actions could include non-core asset disposals, collection of arbitration award proceeds, deferral of expenditure or raising additional equity.

Accordingly, after making enquiries and considering the risks described above, the Directors have assessed that the cash balance held provides the Group with adequate headroom over forecasted expenditure for the following 12 months – as a result, the Directors have adopted the going concern basis of accounting in preparing the annual financial statements.

1.6 Significant accounting policies(A) Basis of accounting

The Group has identified the accounting policies that are most significant to its business operations and the understanding of its results. These accounting policies are those which involve the most complex or subjective decisions or assessments, and relate to the capitalisation of exploration expenditure. The determination of this is fundamental to the financial results and position and requires management to make a complex judgment based on information and data that may change in future periods.

Since these policies involve the use of assumptions and subjective judgments as to future events and are subject to change, the use of different assumptions or data could produce materially different results. The measurement basis that has been applied in preparing the results is historical cost with the exception of financial assets, which are held at fair value.

The significant accounting policies adopted in the preparation of the results are set out below.

(B) Basis of consolidationThe consolidated financial statements include the results of Rockhopper Exploration plc and its subsidiary undertakings to the balance sheet date. Where subsidiaries follow differing accounting policies from those of the Group, those accounting policies have been adjusted to align with those of the Group. Inter-company balances and transactions between Group companies are eliminated on consolidation, though foreign exchange differences arising on inter-company balances between subsidiaries with differing functional currencies are not offset.

(C) Segmental reportingOperating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker as required by IFRS8 Operating Segments. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the board of directors.

The Group’s operations are made up of three segments, the oil and gas exploration and production activities in the geographical regions of the Falkland Islands and the Greater Mediterranean region as well as its corporate activities centered in the UK.

(D) Oil and gas assetsThe Group applies the successful efforts method of accounting for exploration and evaluation (“E&E”) costs, having regard to the requirements of IFRS6 – ‘Exploration for and evaluation of mineral resources’.

Exploration and evaluation (“E&E”) expenditure Expensed exploration & evaluation costs

Expenditure on costs incurred prior to obtaining the legal rights to explore an area, geological and geophysical costs are expensed immediately to the income statement.

Capitalised intangible exploration and evaluation assetsAll directly attributable E&E costs are initially capitalised in well, field, prospect, or other specific, cost pools as appropriate, pending determination.

Notes to the group financial statements continuedfor the year ended 31December 2018



Treatment of intangible E&E assets at conclusion of appraisal activitiesIntangible E&E assets related to each cost pool are carried forward until the existence, or otherwise, of commercial reserves have been determined, subject to certain limitations including review for indicators of impairment. If commercial reserves have been discovered, the carrying value, after any impairment loss, of the relevant E&E assets, are then reclassified as development and production assets within property plant and equipment. However, if commercial reserves have not been found, the capitalised costs are charged to expense.

The Group’s definition of commercial reserves for such purpose is proved and probable reserves on an entitlement basis. Proved and probable reserves are the estimated quantities of crude oil, natural gas and natural gas liquids which geological, geophysical and engineering data demonstrate with a specified degree of certainty (see below) to be recoverable in future years from known reservoirs and which are considered commercially producible. There should be a 50% statistical probability that the actual quantity of recoverable reserves will be more than the amount estimated as proved and probable. The equivalent statistical probabilities for the proven component of proved and probable reserves are 90%.

Such reserves may be considered commercially producible if management has the intention of developing and producing them and such intention is based upon:

– a reasonable assessment of the future economics of such production;– a reasonable expectation that there is a market for all or substantially all the expected hydrocarbon production;– evidence that the necessary production, transmission and transportation facilities are available or can be made available; and– the making of a final investment decision.

Furthermore: (i) Reserves may only be considered proved and probable if producibility is supported by either actual production or

a conclusive formation test. The area of reservoir considered proved includes: (a) that portion delineated by drilling and defined by gas-oil and/or oil-water contacts, if any, or both; and (b) the immediately adjoining portions not yet drilled, but which can be reasonably judged as economically productive on the basis of available geophysical, geological and engineering data. In the absence of information on fluid contacts, the lowest known structural occurrence of hydrocarbons controls the lower proved limit of the reservoir.

(ii) Reserves which can be produced economically through application of improved recovery techniques (such as fluid injection) are only included in the proved and probable classification when successful testing by a pilot project, the operation of an installed programme in the reservoir, or other reasonable evidence (such as, experience of the same techniques on similar reservoirs or reservoir simulation studies) provides support for the engineering analysis on which the project or programme was based.

Development and production assetsDevelopment and production assets, classified within property, plant and equipment, are accumulated generally on a field-by-field basis and represent the costs of developing the commercial reserves discovered and bringing them into production, together with the E&E expenditures incurred in finding commercial reserves transferred from intangible E&E assets.

Depreciation of producing assetsThe net book values of producing assets are depreciated generally on a field-by-field basis using the unit-of-production method by reference to the ratio of production in the year and the related commercial reserves of the field, taking into account the future development expenditure necessary to bring those reserves into production.

DisposalsNet cash proceeds from any disposal of an intangible E&E asset are initially credited against the previously capitalised costs. Any surplus proceeds are credited to the income statement.

DecommissioningProvision for decommissioning is recognised in full when the related facilities are installed. The amount recognised is the present value of the estimated future expenditure. A corresponding amount equivalent to the provision is also recognised as part of the cost of the related oil and gas property. This is subsequently depreciated as part of the capital costs of the production facilities. Any change in the present value of the estimated expenditure is dealt with prospectively as an adjustment to the provision and the oil and gas property. The unwinding of the discount is included in finance cost.



1. Accounting policies continued1.6 Significant accounting policies continued(E) Capital commitments

Capital commitments include all projects for which specific board approval has been obtained up to the reporting date. Projects still under investigation for which specific board approvals have not yet been obtained are excluded.

(F) Foreign currency translation Functional and presentation currency:

Items included in the results of each of the Group’s entities are measured using the currency of the primary economic environment in which the entity operates, the functional currency. The consolidated financial statements are presented in US$ as this best reflects the economic environment of the oil exploration sector in which the Group operates. The Group maintains the accounts of the parent and subsidiary undertakings in their functional currency. Where applicable, the Group translates subsidiary accounts into the presentation currency, US$, using the closing rate method for assets and liabilities which are translated at the rate of exchange prevailing at the balance sheet date and rates at the date of transactions for income statement accounts. Differences are taken directly to reserves.

Transactions and balances:Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign currencies are capitalised in the income statement, except when deferred in equity as qualifying cash flow hedges and qualifying net investment hedges.

The period end rates of exchange actually used were:

31 December 2018 31 December 2017

£ : US$ 1.28 1.35a : US$ 1.15 1.20

(G) Revenue and income(i) Revenue

Revenue arising from the sale of goods is recognised when control over a product or service is transferred to a customer, which is typically at the point that title passes, and the revenue can be reliably measured. Revenue is measured at the fair value of the consideration received or receivable and represents amounts receivable for goods provided in the normal course of business, net of discounts, customs duties and sales taxes.

(ii) Investment income Investment income consists of interest receivable for the period. Interest income is recognised as it accrues, taking into account the effective yield on the investment.

(H) Non-derivative financial instrumentsFinancial assets and financial liabilities are recognised on the Group’s balance sheet when the Group has become a party to the contractual provisions of the instrument.

(i) Other receivablesOther receivables are classified as loans and receivables and are initially recognised at fair value. They are subsequently measured at their amortised cost using the effective interest method less any provision for impairment. A provision for impairment is made where there is objective evidence that amounts will not be recovered in accordance with original terms of the agreement. A provision for impairment is established when the carrying value of the receivable exceeds the present value of the future cash flow discounted using the original effective interest rate. The carrying value of the receivable is reduced through the use of an allowance account and any impairment loss is recognised in the income statement.

(ii) Term depositsTerm deposits are disclosed separately on the face of the balance sheet when their term is greater than three months and they are unbreakable.




(iii) Restricted cashRestricted cash is disclosed separately on the face of the balance sheet and denoted as restricted when it is not under the exclusive control of the Group.

(iv) Cash and cash equivalentsCash and cash equivalents comprise cash in hand and at bank and other short-term deposits held by the Group including breakable and unbreakable deposits with terms of less than three months and breakable term deposits of greater terms than three months where amounts can be accessed within three months without material loss. They are stated at carrying value which is deemed to be fair value.

(v) Financial liabilities and equityFinancial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

(vi) Account and other payablesAccount payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.

(vii) Equity instrumentsEquity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

(I) Income taxes and deferred taxationThe current tax expense is based on the taxable profits for the period, after any adjustments in respect of prior years. Tax, including tax relief for losses if applicable, is allocated over profits before tax and amounts charged or credited to reserves as appropriate.

Deferred taxation is recognised in respect of all taxable temporary differences that have originated but not reversed at the balance sheet date where a transaction or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the exception that deferred tax assets are recognised only to the extent that the directors consider that it is probable that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which temporary differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

(J) Share based remunerationThe Group issues equity settled share based payments to certain employees. Equity settled share based payments are measured at fair value (excluding the effect of non market based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest and adjusted for non market based vesting conditions.

Fair value is measured by use of either Binomial or Monte-Carlo simulation. The main assumptions are disclosed in note 9.

Cash settled share based payment transactions result in a liability. Services received and liability incurred are measured initially at fair value of the liability at grant date, and the liability is remeasured each reporting period until settlement. The liability is recognised on a straight line basis over the period that services are rendered.



2. Use of estimates, assumptions and judgementsThe Group makes estimates, assumptions and judgements that affect the reported amounts of assets and liabilities. Estimates, assumptions and judgements are continually evaluated and based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

The key assumptions concerning the future, and other key sources of estimation uncertainty at the balance sheet date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, are discussed below.

Carrying value of intangible exploration and evaluation assets (note 14) and property, plant and equipment (note 15)The amounts for intangible exploration and evaluation assets represent active exploration and evaluation projects. These amounts will be written off to the income statement as exploration costs unless commercial reserves are established or the determination process is not completed and there are indications of impairment in accordance with the Group’s accounting policy.

In addition for assets under evaluation where discoveries have been made, such as Sea Lion, and property plant and equipment assets their carrying value is checked by reference to the net present value of future cashflows which requires key assumptions and estimates in relation to: commodity prices that are based on forward curves for a number of years and the long-term corporate economic assumptions thereafter, discount rates that are adjusted to reflect risks specific to individual assets, the quantum of commercial reserves and the associated production and cost profiles. Future development costs are estimated taking into account the level of development required to produce the reserves by reference to operators, where applicable, and internal engineers.

Carrying value of goodwill (note 16)Following the acquisition of Mediterranean Oil & Gas plc during 2014, Rockhopper recognised goodwill in line with the requirements of IFRS 3- Business Combinations. Management performs annual impairment tests on the carrying value of goodwill and the Greater Mediterranean CGU that the goodwill is attributed to. The calculation of the recoverable amount is based on the likely future economic benefits of the exploration and evaluation assets in the acquired portfolio and is based on estimated value of the potential and actual discoveries as noted above.

Decommissioning costs (note 23)Decommissioning costs are uncertain and cost estimates can vary in response to many factors, including changes to the relevant legal requirements, the emergence of new technology or experience at other assets. The expected timing, work scope and amount of expenditure may also change. Therefore significant estimates and assumptions are made in determining the provision for decommissioning. The estimated decommissioning costs are reviewed annually by an external expert and the results of the most recent available review used as a basis for the amounts in the Financial Statements. Provision for environmental clean-up and remediation costs is based on current legal and contractual requirements, technology and price levels.




3. Revenue and segmental information Falkland Greater Islands Mediterranean Corporate Total Year ended 31 December 2018 $’000 $’000 $’000 $’000

Revenue — 10,580 — 10,580Cost of sales — (8,531) — (8,531)

Gross profit — 2,049 — 2,049Exploration and evaluation expenses (253) (3,682) (1,079) (5,014)

Costs in relation to acquisition and group restructuring — (58) — (58)Recurring administrative costs — (1,406) (3,922) (5,328)

Total administrative expenses — (1,464) (3,922) (5,386)Charge for share based payments — — (1,478) (1,478)Other income — 943 — 943Foreign exchange gain/(loss) 2,197 (100) (889) 1,208

Results from operating activities and other income 1,944 (2,254) (7,368) (7,678)Finance income — 8 817 825Finance expense — (254) 1 (253)

Loss before tax 1,944 (2,500) (6,550) (7,106)Tax — (25) — (25)

Profit/(loss) for year 1,944 (2,525) (6,550) (7,131)

Reporting segments assets 440,314 41,992 39,156 521,462Reporting segments liabilities 76,996 18,183 10,940 106,119Depreciation — 3,991 120 4,111

Falkland Greater Islands Mediterranean Corporate Total Year ended 31 December 2017 $’000 $’000 $’000 $’000

Revenue — 10,401 — 10,401Cost of sales — (9,573) — (9,573)

Gross profit — 828 — 828Exploration and evaluation expenses — (2,369) (1,053) (3,422)

Costs in relation to acquisition and group restructuring — — — —Other administrative costs (7) (1,487) (3,788) (5,282)

Total administrative expenses (7) (1,487) (3,788) (5,282)Charge for share based payments — — (864) (864)Foreign exchange movement (3,791) 366 2,459 (966)

Results from operating activities and other income (3,798) (2,662) (3,246) (9,706)Finance income — — 783 783Finance expense — (30) (9) (39)

Loss before tax (3,798) (2,692) (2,472) (8,962)Tax 2,866 (43) — 2,823

Loss for year (932) (2,735) (2,472) (6,139)

Reporting segments assets 425,971 51,647 50,447 528,065Reporting segments liabilities 80,462 19,551 7,454 107,467Depreciation — 5,498 189 5,687



4. Cost of sales Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000

Cost of sales 4,563 4,100Depreciation of oil and gas assets (see note 15) 3,968 5,473 8,531 9,573

5. Exploration and evaluation expenses Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000

Allocated from administrative expenses (see note 6) 891 597Capitalised exploration costs impaired (see note 14) 3,884 2,321Other exploration and evaluation expenses 239 504 5,014 3,422

6. Administrative expenses Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000

Directors’ salaries and fees, including bonuses (see note 7) 1,727 1,934Other employees’ salaries 2,638 2,604National insurance costs 637 651Pension costs 164 260Employee benefit costs 88 92Total staff costs (including group restructuring costs) 5,254 5,541Amounts reallocated (2,105) (2,200)Total staff costs charged to administrative expenses 3,149 3,341Auditor’s remuneration (see note 8) 251 244Other professional fees 1,058 992Other 1,648 1,481Depreciation (see note 15) 143 214Amounts reallocated (863) (990) 5,386 5,282

The average number of staff employed during the year was 20 (31 December 2017: 24). The relative decrease between years reflects the continued restructuring of the Greater Mediterranean operation. As at 31 December 2018 the number of staff employed had reduced to 19.

Amounts reallocated relate to the costs of staff and associated overhead in relation to non administrative tasks. These costs are allocated to exploration and evaluation expenses or capitalised as part of the intangible exploration and evaluation assets as appropriate.




7. Directors’ remuneration Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000

Executive salaries 912 1,141Executive bonuses 250 267Company pension contributions to money purchase schemes & pension cash allowance 137 104Benefits 28 37Non-executive fees 400 385 1,727 1,934

The total remuneration of the highest paid director was:

Year ended Year ended 31 December 31 December 2018 2017 £ £

Annual salary 373,000 362,100Bonuses 93,000 108,600Money purchase pension schemes 55,900 36,900Benefits 11,200 10,904 533,100 518,504

Interest in outstanding share options and SARs, by director, are separately disclosed in the directors’ remuneration report.

8. Auditor’s remuneration Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000

KPMG LLPFees payable to the Company’s auditor for the audit of the Company’s annual financial statements 128 117Fees payable to the Company’s auditor and its associates for other services: Audit of the accounts of subsidiaries 72 63Half year review 38 45Tax compliance services 13 19 251 244



9. Share based paymentsThe charge for share based payments relate to options granted to employees of the Group. Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000£

Charge for the long term incentive plan options 1,360 768Charge for shares issued under the SIP throughout the year 118 96 1,478 864

The models and key assumptions used to value each of the grants and hence calculate the above charges are set out below:

Long term incentive plan During 2013 a long term incentive plan (“LTIP”) was approved by shareholders. The LTIP is operated and administered by the Remuneration Committee. During the year a number of LTIP awards (‘Awards’), structured as nil cost options, were granted to executive directors and senior staff.

LTIP awards will generally only vest or become exercisable subject to the satisfaction of a performance condition measured over a three year period (“Performance Period”) determined by the Remuneration Committee at the time of grant. The performance conditions must contain objective conditions, which must be related to the underlying financial performance of the Company. The current performance condition used is based on Total Shareholder Return (“TSR”) measured over a three-year period against the TSR of a peer group of at least 9 other oil and gas companies comprising both FTSE 250, larger AIM oil and gas companies and Falkland Islands focused companies (“Peer Group”). The Peer Group for the Awards may be amended by the Remuneration Committee at their sole discretion as appropriate.

Performance measurement for the Awards are based on the average price over the relevant 90 day dealing period measured against the 90 dealing day period three years later. Awards will typically vest on a sliding scale from 35% to 100% for performance in the top two quartiles of the Peer Group. No awards will vest for performance in the bottom two quartiles.

The Awards granted on 8 October 2013 and 10 March 2014 had an additional performance condition so that no awards would vest if the Company’s share price did not exceed £1.80 based on the average price over the 90 day dealing period up to 31 March 2016. The Remuneration Committee has exercised its discretion to vary the performance condition so that the period for achievement of the £1.80 hurdle rate is extended to 31 March 2023. As a result, any LTIP awards that would have vested on 31 March 2016 will not be exercisable unless the Company’s share price exceeds £1.80 based on an average price over any 90 day dealing period up to 31 March 2023. At the same time, the Remuneration Committee agreed to remove its discretion to allow vesting for performance in the third quartile for all existing and future LTIP awards.

The LTIP has been valued using a Monte Carlo model the key inputs of which are summarised below:

Grant date: 23 April 2018 16 June 2017 22 Apr 2016 13 Apr 2015Closing share price 25.7p 21.25p 31.5p 64.0pNumber granted 7,000,000 6,700,000 10,047,885 4,111,838Weighted average volatility 44.4% 53.3% 60.4% 44.5%Weighted average volatility of index 64.0% 71.4% 71.2% 55.8%Weighted average risk free rate 0.90% 0.18% 0.58% 0.70%Correlation in share price movement with comparator group 13.0% 15.3% 27.5% 33.5%Exercise price 0p 0p 0p 0pDividend yield 0% 0% 0% 0%




The following movements occurred during the year:

At 31 December At 31 December Issue date Expiry date 2017 Issued Lapsed 2018

8 October 2013 8 October 2023 546,145 — — 546,14510 March 2014 10 March 2024 70,391 — — 70,39113 April 2015 13 April 2025 2,977,944 — (2,977,944) —22 April 2016 22 April 2026 6,017,850 — — 6,017,85016 June 2017 16 June 2027 6,700,000 — — 6,700,00023 April 2018 23 April 2028 — 7,000,000 — 7,000,000

16,312,330 7,000,000 (2,977,944) 20,334,386

Share incentive planThe Group has in place an HMRC approved Share Incentive Plan (“SIP”). The SIP allows the Group to award Free Shares to UK employees (including directors) and to award shares to match Partnership Shares purchased by employees, subject to HMRC limits.

Throughout this and the prior year the Group issued two Matching Shares for every Partnership Share purchased.

In the year the Group made a free award of £41,997 (year ended 31 December 2017 £41,997) worth of Free Shares to eligible employees.

This resulted in 156,268 (year ended 31 December 2017: 154,826) Free Shares and under the SIP scheme matching and partnership shares issued were 223,131 (year ended 31 December 2017: 302,622) in the period.

31 December 31 December 2018 2017

The average fair value of the shares awarded (pence) 28 23Vesting 100% 100%Dividend yield Nil NilLapse due to withdrawals Nil Nil

The fair value of the shares awarded will be spread over the expected vesting period.

Share appreciation rightsA share appreciation right (“SAR”) is effectively a share option that is structured from the outset to deliver, on exercise, only the net gain in the form of new ordinary shares that would have been made on the exercise of a market value share option.

No consideration is payable on the grant of a SAR. On exercise, an option price of 1 pence per ordinary share, being the nominal value of the Company’s ordinary shares, is paid and the relevant awardee will be issued with ordinary shares with a market value at the date of exercise equivalent to the notional gain that the awardee would have made, being the amount by which the aggregate market value of the number of ordinary shares in respect of which the SAR is exercised, exceeds a notional exercise price, equal to the market value of the shares at the time of grant (the “base price”). The remuneration committee has discretion to settle the exercise of SARs in cash.

The following movements occurred during the period on SARs:

Exercise price At 31 December At 31 December Issue date Expiry date (pence) 2017 Exercised Lapsed 2018

22 November 2008 22 November 2018 19.25 355,844 (355,844) — —3 July 2009 3 July 2019 30.87 103,368 — — 103,36811 January 2011 11 January 2021 372.75 196,712 — (21,664) 175,04814 July 2011 14 July 2021 239.75 43,587 — — 43,58716 August 2011 16 August 2021 237.00 17,035 — — 17,03513 December 2011 13 December 2021 240.75 29,594 — — 29,59417 January 2012 17 January 2022 303.75 269,026 — (24,485) 244,54130 January 2013 30 January 2023 159.00 317,845 — (40,683) 277,162

1,333,011 (355,844) (86,832) 890,335



10. Foreign exchange Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000

Foreign exchange gain/(loss) on Falkland Islands tax liability (see note 22) 2,197 (3,791)Foreign exchange gain on term deposits, cash and restricted cash 59 460 2,256 (3,331)Foreign exchange on operating activities (1,048) 2,365Total net foreign exchange gain/(loss) 1,208 (966)

11. Finance income and expense Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000

Bank and other interest receivable 825 783Total finance income 825 783Unwinding of discount on decommissioning provisions (see note 23) 244 (4)Other 9 43Total finance expense 253 39

12. Taxation Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000

Current tax: Overseas tax — (14)Adjustment in respect of prior years — (2,866)Total current tax — (2,880)Deferred tax: Overseas tax 25 57Total deferred tax – note 24 25 57Tax on profit on ordinary activities 25 (2,823)Loss on ordinary activities before tax (7,106) (8,962)Loss on ordinary activities multiplied at 26% weighted average rate (31 December 2017: 26%) (1,848) (2,330)Effects of: Income and gains not subject to taxation (2,528) (1,884)Expenditure not deductible for taxation 1,688 3,005Depreciation in excess of capital allowances 1,050 (722)IFRS2 Share based remuneration cost 384 189Losses carried forward 1,275 1,656Effect of tax rates in foreign jurisdictions (21) 134Adjustments in respect of prior years 25 (2,866)Other — (5)Tax charge/(credit) for the year 25 (2,823)

On the 8 April 2015 the Group agreed binding documentation (“Tax Settlement Deed”) with the Falkland Island Government (“FIG”) in relation to the tax arising from the Group’s farm out to Premier Oil plc (“Premier”). As such the Group is able to defer this tax liability under Extra Statutory Concession 16. As it is deferred, the liability is classified as non-current and discounted. Additional information is given in Note 22 Tax payable.




The total carried forward losses and carried forward pre trading expenditures potentially available for relief are as follows:


UK 66,740 62,033Falkland Islands 592,483 576,121Italy 75,278 61,961

In Egypt under the terms of the PSC any taxes arising are settled by EGPC on behalf of the Group. Consequently, any carried forward losses would have no impact on the reported profits of the Group.

No deferred tax asset has been recognised in respect of temporary differences arising on losses carried forward, outstanding share options or depreciation in excess of capital allowances due to the uncertainty in the timing of profits and hence future utilisation. Losses carried forward in the Falkland Islands includes amounts held within entities where utlisation of the losses in the future may not be possible.

13. Basic and diluted loss per share 31 December 31 December 2018 2017 Number Number

Shares in issue brought forward 457,116,500 456,659,052Shares issued – Issued under the SIP 379,399 457,448Shares in issue carried forward 457,495,899 457,116,500Weighted average number of Ordinary Shares for the purposes of basic earnings per share 457,369,112 456,945,871Effects of dilutive potential Ordinary shares Contingently issuable shares — — 457,369,112 456,945,871

$’000 $’000

Net loss after tax for purposes of basic and diluted earnings per share (7,131) (6,139)Loss per share – cents Basic (1.57) (1.34)Diluted (1.57) (1.34)

The average market value of the Company’s shares for the purpose of calculating the dilutive effect of share options was on quoted market prices for the year during which the options were outstanding. The calculation of loss per share is based upon the loss for the year and the weighted average shares in issue. As the Group is reporting a loss in the year then in accordance with IAS33 the share options are not considered dilutive because the exercise of the share options would have the effect of reducing the loss per share.



14. Intangible exploration and evaluation assets Falkland Greater Islands Mediterranean Total $’000 $’000 $’000

As at 31 December 2016 418,584 7,835 426,419Additions 7,387 1,317 8,704Written off to exploration costs — (2,321) (2,321)Transfer to assets held for sale (see note 20) — (824) (824)Foreign exchange movement — 169 169As at 31 December 2017 425,971 6,176 432,147Additions 14,595 3,364 17,959Written off to exploration costs (252) (3,632) (3,884)Transfer from assets held for sale (see note 20) — 834 834Foreign exchange movement — (21) (21)As at 31 December 2018 440,314 6,721 447,035

Falkland Islands licences The additions during the period of $14.6 million relate principally to the Sea Lion development.

In assessing whether it is necessary to undertake a detailed impairment test, management consider whether there are any triggers, e.g. a significant change in the view on long term oil pricing or project cost, that would suggest such a detailed test is necessary. Management do not consider there to be any such triggers.

Nevertheless, management, as a matter of good practice, run their cashflow model regularly. At the year end, the key inputs to this model were a 2019 real terms Brent oil price of $70/bbl, a post-tax discount rate of 12.5% and utilising the operator’s current estimates of capital and operating costs and production profiles. The project is targeting project sanction decision at the end of 2019 (with such decision dependent on securing funding) and is expected to take three and half years from sanction to first oil. The remaining barrels in Sea Lion are expected to be recovered along with those in near field discoveries in a second phase of development.

Sensitivity analysis is performed by, in turn, reducing oil price by $10/bbl, reducing production by 10%, increasing capital expenditure by 10%, increasing operating expenditure by 10% and delaying the development by one year. None of these sensitivities would have led to an impairment charge in the year.

Costs associated with Isobel/Elaine discoveries and a potential phase 3 development are carried at cost and no indication of impairment currently exists although the assets require further appraisal.

Greater Mediterranean licences The $3.4 million additions during the period predominantly relate to work on the Egyptian license interests. An impairment of $3.4 million was recognised during the year in respect of the Raya-1X exploration commitment well in the El Qa’a Plain concession which encountered no hydrocarbons.




15. Property, plant and equipment Oil and gas Other 31 December Oil and gas Other 31 December assets assets 2018 assets assets 2017 $’000 $’000 $’000 $’000 $’000 $’000

Cost brought forward 31,043 1,134 32,177 32,378 1,096 33,474Additions 1,996 25 2,021 970 17 987Foreign exchange (762) (10) (772) 2,524 21 2,545Disposals — (271) (271) — — —Transfer from/(to) assets held for sale 4,891 — 4,891 (4,829) — (4,829)Cost carried forward 37,168 878 38,046 31,043 1,134 32,177Accumulated depreciation and impairment loss brought forward (19,751) (841) (20,592) (14,831) (618) (15,449)Current year depreciation charge (3,968) (143) (4,111) (5,473) (214) (5,687)Foreign exchange 611 7 618 (1,790) (9) (1,799)Disposals — 271 271 — — —Transfer (from)/to assets held for sale (2,396) — (2,396) 2,343 — 2,343Accumulated depreciation and impairment loss carried forward (25,504) (706) (26,210) (19,751) (841) (20,592)Net book value brought forward 11,292 293 11,585 17,547 478 18,025Net book value carried forward 11,664 172 11,836 11,292 293 11,585

All oil and gas assets relate to the Greater Mediterranean region, specifically producing assets in Italy and Egypt.

Asset additions relate almost entirely to the Abu Sennan production asset in Egypt.

Consistent with the approach taken to assess whether the Falkland Island licences should be subject to impairment testing, management did not identify any triggers that would require a formal impairment calculation to be undertaken. Therefore, no impairment was recognised in the period (2017: $nil).

Nonetheless, similar to the Falkland Islands licences future discounted cash flows expected to be derived from production of commercial reserves (the value in use being the recoverable amount) were compared against the carrying value of the asset. The future cash flows were estimated using a realised oil and gas price assumption equal to existing contracts in place and relevant forward curve in 2019 and 2020, and a Brent oil price of $70/bbl and a gas price of a0.25/sm3 in 2019 real terms thereafter and were discounted using a post-tax rate of 10%. Assumptions involved in the impairment measurement include estimates of commercial reserves and production volumes, future oil and gas prices and the level and timing of expenditures, all of which are inherently uncertain. No impairments were identified in this process.

16. Goodwill Greater Mediterranean $’000

As at 31 December 2017 10,789Foreign exchange movement (481)As at 31 December 2018 10,308

Goodwill relates to the corporate acquisition of Mediterranean Oil & Gas plc (“MOG”) during the period ended 31 December 2014. This goodwill is included in the Greater Mediterranean segment and allocated to the Italian CGU, which have the optionality and potential to provide value in excess of this fair value as well as representing the strategic premium associated with a significant presence in a new region. The functional currency of MOG is euros. As such the goodwill is also expressed in the same functional currency and subject to retranslation at each reporting period end. The reduction in the period of $481,000 (2017: $1,350,000 increase) is entirely due to this foreign currency difference. None of the goodwill recognised is expected to be deductible for tax purposes.

The Group tests goodwill annually for impairment or more frequently if there are indicators goodwill might be impaired. The recoverable amounts are determined by reference to a value in use calculation. Future cashflows are estimated using a long term realised gas price of a0.25/sm3 and a realised long-term oil price of $70/bbl in 2019 real terms and were discounted using a post-tax rate of 10%. Assumptions involved in the impairment measurement include estimates of commercial reserves and production volumes, future oil and gas prices and the level and timing of expenditures, all of which are inherently uncertain.



17. Other receivables 31 December 31 December 2018 2017 $’000 $’000

Current Receivables 3,811 9,826 Prepayments 332 473 Accrued interest 396 323 Income tax 81 85 Other 4,890 6,133 9,510 16,840

The carrying value of receivables approximates to fair value. The decrease in receivables in the year is due to the reduction of the receivable due from EGPC. At 31 December 2018, the receivable balance due from EGPC was $1.3 million which is due solely to Rockhopper following the settlement of the amount which was payable to the former parent company of Rockhopper Egypt Pty. Limited, Beach Energy Limited.

Other receivables predominantly relate to IVA balances due from the Italian tax authorities which are in the process of being reclaimed.

18. Restricted cash 31 December 31 December 2018 2017 $’000 $’000

Charged accounts 568 540 568 540

19. Term deposits 31 December 31 December 2018 2017 $’000 $’000

Maturing after the period end: Within three months 10,000 10,000Six to nine month 10,000 10,000Nine months to one year 10,000 10,000 30,000 30,000

Term deposits are disclosed separately on the face of the balance sheet when their term is greater than three months and they are unbreakable.

20. Disposal group held for saleOn 8 June 2017, the Group announced the disposal of a portfolio of non-core interests in onshore Italy. Following failure to satisfy all relevant conditions precedent, including receipt of requisite regulatory approvals in Italy, the Group has decided not to proceed with the transaction.

21. Other payables and accruals 31 December 31 December 2018 2017 $’000 $’000

Accounts payable 2,462 2,551Accruals 12,246 8,654Other creditors 440 1,567 15,148 12,772

Accruals have increased due to costs associated with the Sea Lion development.

All amounts are expected to be settled within twelve months of the balance sheet date and so the book values and fair values are considered to be the same.




22. Tax payable 31 December 31 December 2018 2017 $’000 $’000

Current tax payable — —Non current tax payable 37,860 40,057 37,860 40,057

On the 8 April 2015, the Group agreed binding documentation (“Tax Settlement Deed”) with the Falkland Island Government (“FIG”) in relation to the tax arising from the Group’s farm out to Premier Oil plc (“Premier”).

The Tax Settlement Deed confirms the quantum and deferment of the outstanding tax liability and is made under Extra Statutory Concession 16.

As a result of the Tax Settlement Deed the outstanding tax liability was confirmed at £64.4 million and payable on the first royalty payment date on Sea Lion. Currently the first royalty payment date is anticipated to occur within six months of first oil production which itself is estimated to occur approximately three and a half years after project sanction. As such the tax liability has been reclassified as non-current and discounted at 15%. The tax liability was revised downwards in the year ended 31 December 2017 to £59.6 million, due to the full benefit of the exploration carry being received from Premier on the 2015/16 drilling campaign and the Falkland Islands Commissioner of Taxation agreeing to reduce the liability on that basis in line with the terms of the Tax settlement Deed. A foreign exchange gain of US$2.2 million (2017: US$3.8 million loss) has been recognised in the year.

23. Provisions Abandonment Other 31 December 31 December provision provisions 2018 2017 $’000 $’000 $’000 $’000

Brought forward 5,892 94 5,986 14,914Amounts utilized (854) (27) (881) (1,704)Amounts arising in the period — 10 10 11Unwinding of discount 247 — 247 —Transfer from/(to) liabilities associated with assets held for sale 8,750 — 8,750 (8,772)Foreign exchange (220) (4) (224) 1,537Carried forward at period end 13,815 73 13,888 5,986

The abandonment provision relates to the Group’s licences in the Greater Mediterranean region. The provision covers both the plug and abandonment of wells drilled as well as any requisite site restoration. Assumptions, based on the current economic environment, have been made which management believe are a reasonable basis upon which to estimate the future liability. These estimates are reviewed regularly to take into account any material changes to the assumptions. However, actual decommissioning costs will ultimately depend upon future market prices for the necessary decommissioning works required which will reflect market conditions at the relevant time. Furthermore, the timing of decommissioning is likely to depend on when the fields cease to produce at economically viable rates. This in turn will depend upon future oil and gas prices, which are inherently uncertain.

Other provisions include amounts due to employees for accrued holiday and leaving indemnity for staff in Italy, that will become payable when they cease employment.



24. Deferred tax liability 31 December 31 December 2018 2017 $’000 $’000

At beginning of period 39,202 39,145Movement in period 21 57At end of period 39,223 39,202

The deferred tax liability arises due to temporary differences associated with the intangible exploration and evaluation expenditure. The majority of the balance relates to historic expenditure on licences in the Falklands, where the tax rate is 26%, being utilised to minimise the corporation tax due on the consideration received as part of the farm out disposal during 2012.

Total carried forward losses and carried forward pre-trading expenditures available for relief on commencement of trade at 31 December 2018 are disclosed in note 12 Taxation. No deferred tax asset has been recognised in relation to these losses due to uncertainty that future suitable taxable profits will be available against which these losses can be utilised. The potential deferred tax asset at the 31 December 2018 would be $185 million (31 December 2017: $176 million).

25. Share capital 31 December 2018 31 December 2017 $’000 Number $’000 Number

Called up, issued and fully paid: Ordinary shares of £0.01 each 7,205 457,495,899 7,200 457,116,500

For details of all movements during the year, see note 13.

26. ReservesSet out below is a description of each of the reserves of the Group:

Share premium Amount subscribed for share capital in excess of its nominal value.

Share based remuneration The share incentive plan reserve captures the equity related element of the expenses recognised for the issue of options, comprising the cumulative charge to the income statement for IFRS2 charges for share based payments less amounts released to retained earnings upon the exercise of options.

Own shares held in trust Shares held in trust represent the issue value of shares held on behalf of participants in the SIP by Capita IRG Trustees Limited, the trustee of the SIP as well as shares held by the Employee Benefit Trust which have been purchased to settle future exercises of options.

Merger reserve The difference between the nominal value and the fair value of shares issued on acquisition of subsidiaries.

Foreign currency translation Exchange differences arising on consolidating the assets and liabilities of the Group’s subsidiaries are reserve classified as equity and transferred to the Group’s translation reserve.

Special reserve The reserve is non distributable and was created following cancellation of the share premium account on 4 July 2013. It can be used to reduce the amount of losses incurred by the Parent Company or distributed or used to acquire the share capital of the Company subject to settling all contingent and actual liabilities as at 4 July 2013. Should not all of the contingent and actual liabilities be settled, prior to distribution the Parent Company must either gain permission from the actual or contingent creditors for distribution or set aside in escrow an amount equal to the unsettled actual or contingent liability.

Retained losses Cumulative net gains and losses recognised in the financial statements.




27. Lease commitmentsThe future aggregate minimum lease payments under non-cancellable operating leases in respect of land and buildings were as follows:

31 December 31 December 2018 2017 $’000 $’000

Total committed within 1 year 504 569Total committed between 1 and 5 years 351 1,285 855 1,854

28. Capital commitmentsCapital commitments represent the Group’s share of expected costs in relation to its licence interests net of any carry arrangements that are in force.

As at the date of these account the Group committed to fund its share of the approved work programs and budgets for our licence interests in the calendar year ending 31 December 2019 of US$18 million.

29. Related party transactionsThe remuneration of directors, who are the key management personnel of the Group, is set out below in aggregate. Further information about the remuneration of individual directors is provided in the Directors’ Remuneration Report on pages 39 to 49.


Short term employee benefits 1,636 1,875Pension contributions 137 59Share based payments 742 120 2,515 2,054



30. Risk management policiesRisk reviewThe risks and uncertainties facing the Group are set out in the risk management report. Risks which require further quantification are set out below.

Foreign exchange risks: The Group is exposed to foreign exchange movements on monetary assets and liabilities denominated in currencies other than US$, in particular the tax liability with the Falkland Island Government which is a GB£ denominated balance. In addition a number of the Group’s subsidiaries have a functional currency other than US$, where this is the case the Group has an exposure to foreign exchange differences with differences being taken to reserves.

Asset balances include cash and cash equivalents, restricted cash and term deposits of $41.0 million of which $35.3 million was held in US$ denominations. The following table summarises the split of the Group’s assets and liabilities by currency:

$ £ a EGP £ CAD $ Currency denomination of balance $’000 $’000 $’000 $’000 $’000

Assets31 December 2018 491,148 2,440 27,234 640 —31 December 2017 495,535 2,989 29,496 22 —Liabilities 31 December 2018 51,200 38,346 16,518 — 5531 December 2017 47,087 42,031 18,349 — —

The following table summarises the impact on the Group’s pre-tax profit and equity of a reasonably possible change in the US$ to GB£ exchange rate and the US$ to euro exchange:

Pre tax profit Total equity +10% US$ rate –10% US$ rate +10% US$ rate –10% US$ rate increase decrease increase decrease $’000 $’000 $’000 $’000

US$ against GB£31 December 2018 (3,591) 3,591 (3,591) 3,59131 December 2017 (3,904) 3,904 (3,904) 3,904US$ against euro31 December 2018 1,072 (1,072) 1,072 (1,072)31 December 2017 1,117 (1,117) 1,117 (1,117)

Capital risk management: the Group manages capital to ensure that it is able to continue as a going concern whilst maximising the return to shareholders. The capital structure consists of cash and cash equivalents and equity. The board regularly monitors the future capital requirements of the Group, particularly in respect of its ongoing development programme.

Credit risk; the Group recharges partners and third parties for the provision of services and for the sale of Oil and Gas. Should the companies holding these accounts become insolvent then these funds may be lost or delayed in their release. The amounts classified as receivables as at the 31 December 2018 were $3,948,000 (31 December 2017: $9,826,000). Credit risk relating to the Group’s other financial assets which comprise principally cash and cash equivalents, term deposits and restricted cash arises from the potential default of counterparties. Investments of cash and deposits are made within credit limits assigned to each counterparty. The risk of loss through counterparty failure is therefore mitigated by the Group splitting its funds across a number of banks, two of which are part owned by the British government.

Interest rate risks; the Group has no debt and so its exposure to interest rates is limited to finance income it receives on cash and term deposits. The Group is not dependent on its finance income and given the current interest rates the risk is not considered to be material.

Liquidity risks; the Group makes limited use of term deposits where the amounts placed on deposit cannot be accessed prior to their maturity date. The amounts applicable at the 31 December 2018 were $30,000,000 (31 December 2017: $30,000,000).




31 December 31 December 2018 2017 Notes $’000 $’000

Non current assetsProperty, plant and equipment 2 88 169Investments 3 93,617 93,617Group undertakings 4 438,652 — Current assetsOther receivables 5 917 413,069Restricted cash 511 540Term deposits 30,000 30,000Cash and cash equivalents 6,999 18,792

Total assets 570,784 556,187

Current liabilities Other payables 6 27,167 7,454

Total liabilities 27,167 7,454

Equity Share capital 7 7,205 7,200Share premium 11 3,422 3,282Share based remuneration 11 5,104 5,610Own shares held in trust 11 (3,369) (3,383)Merger reserve 11 74,575 74,575Special reserve 11 456,680 461,449Retained earnings 11 — —

Attributable to the equity shareholders of the company 543,617 548,733

Total liabilities and equity 570,784 556,187

These financial statements were approved by the directors and authorised for issue on 1 April 2019 and are signed on their behalf by:


Registered Company number: 05250250

Parent company financial statements – company balance sheet As at 31 December 2018



Share Share Share based Shares held Merger Special Retained Total capital premium remuneration in trust reserve reserve losses Equity $’000 $’000 $’000 $’000 $’000 $’000 $’000 $’000

Balance at 31 December 2016 7,194 3,149 6,251 (3,407) 74,575 462,549 — 550,311

Total comprehensive loss for the year — — — — — — (2,472) (2,472)Share based payments — — 864 — — — — 864Share issues in relation to SIP 6 133 — (109) — — — 30Other transfers — — (1,505) 133 — (1,100) 2,472 —Balance at 31 December 2017 7,200 3,282 5,610 (3,383) 74,575 461,449 — 548,733

Total comprehensive loss for the year — — — — — — (6,621) (6,621)Share based payments — — 1,478 — — — — 1,478Share issues in relation to SIP 5 140 — (118) — — — 27Other transfers — — (1,984) 132 — (4,769) 6,621 —

Balance at 31 December 2018 7,205 3,422 5,104 (3,369) 74,575 456,680 — 543,617

Company statement of changes in equityfor the year ended 31December 2018



1. Accounting policiesCompany and its operationsRockhopper Exploration plc, the ‘Company’, a public limited company quoted on AIM, incorporated and domiciled in the United Kingdom (‘UK’), holds, through its subsidiaries, certain exploration licences granted in 2004 and 2005 for the exploration and exploitation of oil and gas in the Falkland Islands. In 2014, it diversified its portfolio through the acquisition of an exploration and production company with operations principally based in Italy and during 2016 augmented this through the acquisition of exploration and production assets in Egypt. The registered office of the Company is 4th Floor, 5 Welbeck Street, London, W1G 9YQ.

Authorisation of financial statements and statement of compliance with financial reporting standard 101 reduced disclosure framework (FRS101)The financial statements of Rockhopper Exploration plc for the year ended 31 December 2018 were approved and signed by the Group Chief Financial Officer on 1 April 2019 having been duly authorized to do so by the board of directors. The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 (FRS 100) issued by the Financial Reporting Council. Accordingly, these financial statements were prepared in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) and in accordance with the provisions of the Companies Act 2006. The amendment to FRS101 (2014/15 cycle) issued in July 2015 and effective immediately have been applied.

In these financial statements, the Company as permitted by FRS101 has taken advantage of the disclosure exemptions available under that standard in relation to accounting standards issued but not yet effective or implemented, share-based payment information, financial instruments, capital management, presentation of comparative information in respect of certain assets, presentation of a cash-flow statement and certain related party transactions.

Basis of accountingThese financial statements are prepared on a going concern basis. The financial statements have been prepared under the historical cost convention. Historical cost is generally based on the fair value of the consideration given in exchange for the assets. As permitted by Section 408 of the Companies Act 2006, the profit and loss account of the Company is not presented as part of these financial statements. The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these financial.

All values are rounded to the nearest thousand dollars ($’000), except where otherwise indicated.

At the date of authorisation of this report the following standards and interpretations, which have not been applied in this report, were in issue but not yet effective are applicable to the financial statements of the Company.

– IFRS16 Leases (effective date for annual periods beginning on or after 1 January 2019);

Management does not believe that the application of these standards will have a material impact on the financial statements.

Going concernAt 31 December 2018, the Group had available cash and term deposits of $40 million. In addition the first phase of the Group’s main development, Sea Lion, is fully funded from sanction through a combination of Development Carries and a loan facility from the operator.

The Group monitors its cash position, cash forecasts and liquidity on a regular basis and takes a conservative approach to cash management, with surplus cash held on term deposits with a number of major financial institutions.



Notes to the company financial statements for the year ended 31 December 2018



1. Accounting policies continuedGoing concern continuedUnder the base case forecast and the downside scenarios run, the Group will have sufficient financial headroom to meet forecast cash requirements for at least the 12 months from the date of approval of the 2018 financial statements. However, beyond the 12 month going concern assessment depending on the timing of sanction for the Sea Lion development, in the absence of any mitigating actions, the Group may have insufficient funds to meet its forecast cash requirements.

Potential mitigating actions could include non-core asset disposals, collection of arbitration award proceeds, deferral of expenditure or raising additional equity.

Accordingly, after making enquiries and considering the risks described above, the Directors have assessed that the cash balance held provides the Company and the Group with adequate headroom over forecasted expenditure for the following 12 months – as a result, the Directors have adopted the going concern basis of accounting in preparing the annual financial statements.

Share based paymentThe Company issues equity settled share based payments to certain employees. Equity settled share based payments are measured at fair value (excluding the effect of non market based vesting conditions) at the date of grant. The fair value determined at the grant date of the equity settled share based payments is expensed on a straight line basis over the vesting period, based on the Company’s estimate of shares that will eventually vest and adjusted for non market based vesting conditions.

Fair value is measured by use of either Binomial or Monte-Carlo simulation.

Cash settled share based payment transactions result in a liability. Services received and liability incurred are measured initially at fair value of the liability at grant date, and the liability is remeasured each reporting period until settlement. The liability is recognised on a straight line basis over the period that services are rendered.

InvestmentsThe investments in the subsidiary undertakings are included in the Company financial statements at cost. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of investment may not be recoverable. If any such indication of impairment exists, the Company makes an estimate of its recoverable amount. Where the carrying amount of an investment exceeds its recoverable amount, the investment is considered impaired and is written down to its recoverable amount.

Income taxes and deferred taxationThe current tax expense is based on the taxable profits for the period, after any adjustments in respect of prior years. Tax, including tax relief for losses if applicable, is allocated over profits before tax and amounts charged or credited to reserves as appropriate.

Deferred taxation is recognised in respect of all taxable temporary differences that have originated but not reversed at the balance sheet date where a transaction or events have occurred at that date that will result in an obligation to pay more, or a right to pay less or to receive more, tax, with the exception that deferred tax assets are recognised only to the extent that the directors consider that it is probable that there will be suitable taxable profits from which the future reversal of the underlying temporary differences can be deducted.

Deferred tax is measured on an undiscounted basis at the tax rates that are expected to apply in the periods in which temporary differences reverse, based on tax rates and laws enacted or substantively enacted at the balance sheet date.

Foreign currenciesThe functional and presentation currency of the Company is US$.

Transactions denominated in foreign currencies are translated at the exchange rate ruling at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated into dollars at the exchange rates ruling at the balance sheet date and any differences thereon are included in the income statement.

Notes to the company financial statements continuedfor the year ended 31 December 2018



The period end rates of exchange actually used were:

31 December 2018 31 December 2017

£ : US$ 1.28 1.35a : US$ 1.15 1.20

Property, plant and equipment and depreciationTangible fixed assets are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset evenly over its expected useful life as follows:

Office equipment Over three yearsLeasehold improvements Over five years

Non-derivative financial instrumentsFinancial assets and financial liabilities are recognised on the Company’s balance sheet when the Company has become a party to the contractual provisions of the instrument.

(i) Other receivablesOther receivables are classified as loans and receivables and are initially recognised at fair value. They are subsequently measured at their amortised cost using the effective interest method less any provision for impairment. A provision for impairment is made where there is objective evidence that amounts will not be recovered in accordance with original terms of the agreement. A provision for impairment is established when the carrying value of the receivable exceeds the present value of the future cash flow discounted using the original effective interest rate. The carrying value of the receivable is reduced through the use of an allowance account and any impairment loss is recognised in the income statement.

(ii) Term depositsTerm deposits are disclosed separately on the face of the balance sheet when their term is greater than three months and they are unbreakable.

(iii) Restricted cashRestricted cash is disclosed separately on the face of the balance sheet and denoted as restricted when it is not under the exclusive control of the Group.

(iv) Cash and cash equivalentsCash and cash equivalents comprise cash in hand and at bank and other short-term deposits held by the Group including breakable and unbreakable deposits with terms of less than three months and breakable term deposits of greater terms than three months where amounts can be accessed within three months without material loss. They are stated at carrying value which is deemed to be fair value.

(v) Financial liabilities and equityFinancial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the Group after deducting all of its liabilities.

(vi) Trade payablesTrade payables are initially recognised at fair value and subsequently at amortised cost using the effective interest method.

(vii) Equity instrumentsEquity instruments issued by the Company are recorded at the proceeds received, net of direct issue costs.

LeasingRentals payable under operating leases are charged to income on a straight-line basis over the term of the relevant lease. Benefits received and receivable as an incentive to enter into an operating lease are also spread on a straight-line basis over the lease term.



2. Property, plant and equipment 31 December 31 December 2018 2017 $’000 $’000

Cost brought forward 1,026 1,010Additions 25 16Disposals (272) —Cost carried forward 779 1,026Accumulated depreciation brought forward (857) (693)Depreciation charge (106) (164)Disposals 272 —Accumulated depreciation carried forward (691) (857)Net book value brought forward 169 317Net book value carried forward 88 169

3. Investments 31 December 31 December 2018 2017 $’000 $’000

Cost brought forward 139,117 139,117Additions — —Cost carried forward 139,117 139,117Amounts provided brought and carried forward (45,500) (45,500)Net book value brought forward 93,617 93,617Net book value carried forward 93,617 93,617

All amounts relate to subsidiary undertakings. Additions during the prior period relate to the acquisition of 100% of the ordinary issued share capital of Falkland Oil and Gas Limited and Beach Petroleum Egypt Pty Limited (now Rockhopper Egypt Pty Limited).

Details of the investments at the period end were as follows:

Percentage Class of held Company Incorporated share %

Rockhopper Resources Limited England & Wales Ordinary 100Rockhopper Exploration (Oil) Limited England & Wales Ordinary 100Rockhopper Exploration (Hydrocarbons) Limited England & Wales Ordinary 100Rockhopper Exploration (Petrochemicals) Limited England & Wales Ordinary 100Rockhopper Exploration (Oil) Limited Falkland Islands Ordinary 100Rockhopper Mediterranean Limited England & Wales Ordinary 100Rockhopper Civita Limited England & Wales Ordinary 100Rockhopper Italia SpA Italy Ordinary 100Melita Exploration Company Limited Malta Ordinary 100Falkland Oil and Gas Limited Falkland Islands Ordinary 100Desire Petroleum Ltd England & Wales Ordinary 100Rockhopper Egypt Pty Ltd Australia Ordinary 100




4. Group undertakings 31 December 31 December 2018 2017 $’000 $’000

Group undertakings 438,652 — 438,652 —

Amounts with Group undertakings are subject to loan agreements, repayable on demand and interest free. Disclosure reflects the Company’s expectation that repayment is not likely to occur within the next twelve months. Amounts with Group undertakings are net of provisions of $12,346,000.

5. Other receivables


Receivables 181 9Prepayments 241 442Accrued interest 396 323Other 99 131Group undertakings — 412,164 917 413,069

Amounts with Group undertakings are subject to loan agreements, repayable on demand and interest free. Amounts with Group undertakings in the prior year were net of provisions of $12,346,000.

6. Other payables 31 December 31 December 2018 2017 $’000 $’000

Trade creditors 1,641 1,350Other creditors 228 658Accruals 9,073 5,446Group undertakings 16,225 — 27,167 7,454

7. Share capital 31 December 31 December 2018 2017 Number Number

Shares in issue brought forward 457,116,500 456,659,052Shares issued – Issued under the SIP 379,399 457,448Shares in issue carried forward 457,495,899 457,116,500

31 December 2018 31 December 2017 $’000 Number $’000 Number

Called up, issued and fully paid: Ordinary shares of £0.01 each 7,205 457,495,899 7,200 457,116,500



8. Salaries and directors’ remuneration Year ended Year ended 31 December 31 December 2018 2017 $’000 $’000

Salaries and fees 3,728 3,806National insurance costs 465 481Pension costs 140 181Employee benefit costs 81 77Average number of employees 14 15

Disclosures in relation to directors’ remuneration are given on a consolidated basis in the directors’ report and note 7 of the Group accounts.

9. Auditor’s remunerationNote 8 of the Group accounts provides details of the remuneration of the Company’s auditor on a Group basis.

10. Share based paymentsNote 9 of the Group accounts provides details of share based payments of the Group. The amounts disclosed are the same as those of the Company.

11. Capital and reservesFor description of each of the reserves of the Company please see Note 26 of the Group accounts.

12. Financial CommitmentsThe future aggregate minimum lease payments under non-cancellable operating leases in respect of land and buildings were as follows:


Total committed within 1 year 392 498Total committed between 1 and 5 years — 382 392 880

13. Related partiesNote 29 of the Group accounts provides details on remuneration of key management personnel of the Group. The amounts disclosed are the same as those of the Company.




Key licence interests as at 1 April 2019



Falkland IslandsNorth Falkland Basin Rockhopper working Licence phase Licence Operator interest % Field/Discovery expiry date

PL003a Rockhopper 95.50 — 01/05/2021PL003b Rockhopper 60.50 — 01/05/2021PL004a Premier Oil 64.00 Isobel Deep 01/05/2021PL004b Premier Oil 64.00 Beverley Casper South Zebedee 01/05/2021PL004c Premier Oil 64.00 — 01/05/2021PL005 Rockhopper 100.00 — 01/05/2021PL032 Premier Oil 40.00 Casper North 01/05/2021 – Sea Lion Discovery Area Sea Lion 15/04/2020PL033 Premier Oil 40.00 — 01/05/2021

South Falkland Basin Rockhopper working Licence phase Licence Operator interest % Field/Discovery expiry date

PL010–PL016 Rockhopper 100.00 — 03/12/2020PL025–PL029 Rockhopper 100.00 — 15/12/2021PL031 Rockhopper 100.00 — 15/12/2021

Greater MediterraneanEgypt Rockhopper working Licence phase Licence Operator interest % Field/Discovery expiry date

Abu Sennan Kuwait Energy 22.00 Various 01/02/2032 to 03/07/2036

Italy Rockhopper working Licence phase Licence Operator interest % Field/Discovery expiry date

A.C35.AG Eni 20.00 Guendalina 25/11/2022Serra San Bernardo (Monte Grosso)* Eni 22.89 — 13/07/2013*Aglavizza Rockhopper 100.00 Civita 17/12/2032

* Licence currently suspended. Revised expiry date will be known once regulatory approval received to drill.

2C best estimate of contingent resources

2P proven plus probable reserves

3C a high estimate category of contingent resources

AGM Annual General Meeting

Beach Energy Beach Petroleum (Egypt) Pty Limited

Best a best estimate category of Prospective Resources also used as a generic term to describe a best, or mid estimate

Board the Board of Directors of Rockhopper Exploration plc

boe barrels of oil equivalent

bopd barrels of oil per day

boepd barrels of oil equivalent per day

Capex capital expenditure

Cash resources Cash and term deposits

Company Rockhopper Exploration plc

E&P exploration and production

EGPC Egyptian General Petroleum Company

EIS Environmental Impact Statement

ERCE ERC Equipoise Limited

Farm-down to assign an interest in a licence to another party

FEED Front End Engineering and Design

FDP Field Development Plan

FID Final Investment Decision

FIG Falkland Islands Government

FOGL Falkland Oil and Gas Limited

FPSO Floating Production, Storage and Offtake vessel

G&A General and administrative costs

Group the Company and its subsidiaries

High high estimate category of Prospective Resources also used as a generic term to describe a high or optimistic estimate

IFRS International Financial Reporting Standard

kboepd thousand barrels of oil equivalent per day

Low a low estimate category of Prospective Resources also used as a generic term to describe a low or conservative estimate

LOI Letter of Intent

mmbbls million barrels

mmboe million barrels of oil equivalent

mmbtu million British thermal units

MMstb million stock barrels (of oil)

mscf thousand standard cubic feet

net pay the portion of reservoir containing hydrocarbons that through the placing of cut offs for certain properties such as porosity, water saturation and volume of shale determine the productive element of the reservoir

P&A plug and abandon

PIM Project Information Memorandum

Premier Premier Oil plc

PSV virtual exchange point

scm standard cubic metre

STOIIP stock-tank oil initially in place

SURF Subsea, Umbilicals, Risers and Flowlines

tvdss true vertical depth subsea

Glossary

Supplementary Information Rockhopper Exploration plc


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Strategic Report 1 Highlights 3 Rockhopper – the story so far 4 Rockhopper at a glance 6 Vision, strategy and business model 7 Chairman and Chief Executive Officer’s review 9 Industry overview 10 Sea Lion Phase 1 development overview 12 Operations review17 Key Performance Indicators (KPIs)18 Financial review21 Internal controls and risk management22 Principal risks and uncertainties 26 Health, safety, environmental and social management

Governance Report27 Rockhopper Board28 Board of Directors30 Senior management team 31 Corporate governance statement35 Audit & Risk Committee Chairman’s report 38 Nomination Committee Chairman’s report39 Remuneration report50 Statutory information52 Independent auditor’s report to the

members of Rockhopper Exploration plc

Financial StatementsGroup company financial statements55 Group income statement55 Group statement of comprehensive income56 Group balance sheet57 Group statement of changes in equity58 Group cash flow statement59 Notes to the group financial statements

Parent company financial statements79 Company balance sheet80 Company statement of changes in equity81 Notes to the company financial statements

87 Key licence interests as at 1 April 2019

Supplementary Information88 Glossary89 Shareholder information

Cover: Stanley Harbour

Rockhopper Exploration plc (AIM: RKH) is an oil and gas exploration and production company with key interests in the North Falkland Basin and the Greater Mediterranean region.

Key contacts

Registered address and head office:4th Floor5 Welbeck StreetLondon W1G 9YQ

NOMAD and joint brokerCanaccord Genuity Limited88 Wood Street London EC2V 7QR

Joint brokerPeel Hunt LLPMoor House120 London Wall London EC2Y 5ET

SolicitorsAshurst LLPBroadwalk House5 Appold StreetLondon EC2A 2DA

Principal BankersRoyal Bank of Scotland plc36 St Andrew SquareEdinburgh EH2 2YB

AuditorKPMG LLP15 Canada SquareLondon E14 5GL

RegistrarComputershare Investor Services plcVintners Place68 Upper Thames StreetLondon EC4V 3BJ

Concerns and procedures

General [email protected]

Audit committee [email protected]

Websitewww.rockhopperexploration.co.uk

Shareholder concerns:Should shareholders have concerns which have not been adequately addressed by the chairman or chief executive, please contact the chairman of the audit committee at:[email protected]

Whistle-blowing procedures:Should employees, consultants, contractors or other interested parties have concerns which have not been adequately addressed by the chairman or chief executive, please contact the chairman of the audit committee at:[email protected]

Shareholder information

Supplementary InformationRockhopper Exploration plc


Rockhopper E

xploration plc R

eport and Accounts for the year ended 31 D

ecember 2018

Telephone +44 (0)207 486 1677info@rockhopperexploration.co.ukwww.rockhopperexploration.co.ukTwitter @RockhopperExplo

Company Reg. No. 05250250

Rockhopper Exploration plc

Head office:4th Floor5 Welbeck StreetLondon W1G 9YQ

Building a well-funded, full-cycle, exploration-led

E&P company

Report and Accounts for the year ended 31 December 2018

rockhopper exploration plc building a well-funded, full ... · [email protected]...

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